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Austin is right around the corner, and I’m looking forward to catching up with our section members at the section program on Monday. We are also doing a section dinearound on Tuesday evening at Fixe Southern House. Please let me know if you’d like to join us for dinner – there’s lots of room.

I would also like to remind everyone of our membership goal. Please keep those member nominations coming – our section has done a great job meeting our goal for the past few years, and I look forward to hearing from even more members with proposed nominees.

Kudos to Section Vice Chair Liz Roussel on obtaining summary judgment in a difficult ADA case last year inSpencer-Martin v. Exxon Mobil Corp., CV 16-789-SDD-RLB, 2018 WL 3015759 (M.D. La. June 15, 2018). The defense persuaded the court that “Plaintiff was a direct threat to herself and her co-workers. Thus, Plaintiff has failed to establish a prima facie case under the ADA because she has not shown that she was qualified for the position.” Id. at *16. Well done Liz! The decision, while on the long side, is well worth the read.

Finally, thank you to members Carla Hartley, Jean Faure, Chad Hatmaker and Caroline Berdzik for their submissions to the quarterly newsletter this month.

Helen Holden

Spencer Fane LLP

P.S. – It’s not too early to mark your calendar for the summer meeting in Sun Valley. I’m looking forward to it already.

NLRB Returns to Traditional Independent Contractor Test

By Jean Faure, Faure Holden

On January 25, 2019, the National Labor Relations Board reversed an Obama-era decision, returned to the traditional independent contractor analysis and restored significance to a worker’s “entrepreneurial opportunity” for financial gain in determining whether the individual is an employee or independent contractor under the National Labor Relations Act. The Obama-era decision in FedEx HomeDelivery (2014) stated that the independent contractor determination should be viewed through a lens of “economic dependency”—meaning that workers who are economically dependent on an employer for their livelihood are more likely to be viewed as employees. The NLRB’s decision in SuperShuttle DFW, Inc., 367 NLRB 75, involved shuttle-van-driver franchisees of SuperShuttle at Dallas-Fort Worth Airport. The Board concluded that the franchisees are not statutory employees under the National Labor Relations Act (the Act), but rather independent contractors excluded from the Act’s coverage. The Board found that the franchisees’ leasing or ownership of their work vans, their method of compensation, and their nearly unfettered control over their daily work schedules and working conditions provided the franchisees with significant entrepreneurial opportunity for economic gain. These factors, along with the absence of supervision and the parties’ understanding that the franchisees are independent contractors, resulted in the Board’s finding that the franchisees are not employees under the Act. The NLRB focused on the fact that the Super Shuttle franchisees were afforded a large degree of discretion in making decisions that drive how much money they make—entrepreneurial opportunity for gain or loss. It is clear that the NLRB is moving in a more employer-friendly direction on the independent contractor issue. That distinction obviously matters because employees enjoy many rights and protections under the NLRA—whether they are represented by a union or not—whereas independent contractors do not.

NYC Commission on Human Rights Issues Guidance on Discrimination Based on Hair

By Caroline Berdzik, Goldberg Segalla

The New York City Commission on Human Rights released legal guidance relating to discrimination on the basis of hair and hairstyles. While the guidance does not change existing law, it makes clear the commission’s position that the New York City Human Rights Law bans discriminatory practices by employers, housing providers, and other providers of public accommodations based on an individual’s natural hair or hairstyles that are closely related to racial, ethnic, or cultural identities.

The guidanceprovides an extensive overview of the historical context of discrimination related to an individual’s hairstyle and provides several examples of employer policies and policies of other institutions, including school districts, that could run afoul of the law. A few examples of unlawful policies include:

·A policy that requires Black employees to straighten or relax their hair

·A policy prohibiting a male student athlete with locs from participating in an athletic competition because his hair is below his shoulders, but allowing Caucasian student-athletes with long hair to tie their hair back

·A nightclub’s policy that patrons with natural hairstyle do not meet their dress code

Stereotyping as a form of discrimination has been an evolving principle for the last 30 years.

In 1989, the landmark Supreme Court case Price Waterhouse v. Hopkins first recognized gender stereotyping as a form of sex discrimination when a female employee was denied a promotion because her behavior and choice of dress did not conform with supposed female attributes.

While the commission’s guidancemostly focuses on racial discrimination, it also mentions and provides examples of similar types of discrimination based on other protected classes, including gender and religion.

Employers in all jurisdictions are advised to revisit their policies on appearance and grooming standards and to ensure that managers are trained and aware of these potential biases related to an individual’s hairstyle.

On February 25, 2019, the United States Supreme Court vacated a decision previously decided by the full Ninth Circuit because it was filed after Judge Stephen Reinhardt, who authored the opinion, died. In the case, Rizo v. Yovino, the Ninth Circuit held that employers could not rely upon an employee’s prior salary as a “factor other than sex” in defending against a claim under the Equal Pay Act. We discussed the Ninth Circuit’s decision here. Notably, the Ninth Circuit was the only federal circuit court to decide that employers could never rely upon salary history as a factor other than sex. All eleven judges (including Judge Reinhart) in the Ninth Circuit had agreed that prior law should be overturned, and that the employer’s utilization of salary history alone to set salaries was impermissible.

In its decision, the Supreme Court explained that “federal judges are appointed for life, not for eternity.”The justices stated that “[b]ecause Judge Reinhardt was no longer a judge” when the decision was filed, the Ninth Circuit erred, which “effectively allowed a deceased judge to exercise the judicial power of the United States after his death.”

The Court’s decision has the effect of restoring prior law in the Ninth Circuit. However, employers in the Ninth Circuit should continue to be cautious in utilizing prior salary to set wages, given that 10 current judges agree that salary history alone is not sufficient to justify a pay disparity. Further, the Rizo decision will potentially impact employers nationwide because the case had created a circuit split on whether employers can justify a wage differential between male and female employees by relying on prior salary, signaling that the issue may eventually find its way to the Supreme Court.

On January 23rd the US Court of Appeals for the Seventh Circuit held that applicants cannot make a claim for disparate impact age discrimination under the ADEA.In March 2014, Dale Kleber, an attorney, applied for an in-house counsel position with CareFusion Corporation.The job description required applicants to have “3 to 7 years (no more than 7 years) of relevant legal experience.”Kleber, who was age 58 when he applied, had more than seven years’ experience and was thus not selected for the position.CareFusion hired a 29 year old applicant who met but did not exceed the experience requirement.Kleber then sued claiming that the experience requirement created a disparate impact in violation of section 4(a)(2) of the ADEA.

In affirming the dismissal of Kleber’s case the Seventh Circuit focused on the plain language of section 4(a)(2) of the ADEA.Section 4(a)(2) makes it unlawful for an employer:

to limit, segregate or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.

Id. (emphasis supplied). Since the relevant statutory language only protects employees, the court held that Kleber could not state a disparate impact claim.In doing so, the Seventh Circuit joined the Eleventh Circuit in holding that a disparate impact claim is not available to applicants under the ADEA.Other Courts of Appeals have held to the contrary.

While this decision is a win for employers, it does not change the fact that all employment policies, selection tests, and other selection procedures and criteria must be neutral on their face, must not have a disparate impact on a protected class, and that the disparate impact theory is still available to employees under the ADEA.

Happy 2019 To California Employers - Ring In The Year With New Harassment Laws

Carla J. Hartley, Dillingham & Murphy, LLP, San Francisco, CA

In response to the #MeToo movement, including the ouster of several of its own members as harassers, the California Legislature recently enacted or amended a number of laws related to sexual harassment. Employers with operations in California should be aware of the some significant changes going into effect January 1, 2019.

New Harassment Training Requirements

California currently requires that employers with 50 or more employees provide sexual harassment training to supervisors. New legislation expands this obligation to employers with five or more employees and requires training for all employees. Training for non-supervisors must be at least one hour long while that for supervisors remains two hours. The harassment training may be included with other types of training and need not be completed in a single session. As a reminder, the training is required within six months of hire for new employees and then every two years.

Employers must be in compliance with the new training requirements by January 1, 2020.

On January 1, 2020, the training requirement will be extended to seasonal and temporary employees. Employers must provide the training within 30 calendar days after the hire date or within 100 hours worked, whichever occurs first. For temporary employees employed by a temporary services employer, as defined by the California Labor Code, the agency is responsible for the training.

The Legislature has directed the California Department of Fair Employment and Housing to provide online courses for the trainings. Employers have the option of using the DFEH courses or other versions. Employers who distribute their own harassment information sheet (as opposed to the DFEH version) must include internet access information for the DFEH training courses.

Finally, employers may, but are not required to, provide "bystander intervention training" to enable bystanders to recognize and take action if they observe "potentially problematic behaviors." The "potentially problematic behaviors" are not defined.

Personal Liability for Retaliation

Individual harassers may now be held personally liable for retaliating against the victim of their harassment. Previously, individuals could only be held personally liable for harassment under the Fair Employment and Housing Act.

Legal Standards Applicable to Harassment Claims

The Legislature has specified that the following legal standards should be applied to harassment claims:

A harassment plaintiff need not demonstrate that his or her tangible productivity has declined but only that harassment has altered his or her working conditions making it more difficult to do the job (approving Justice Ruth Bader Ginsburg's concurrence in Harris v. Forklift Systems, 510 U.S. 17, 26 (1993)).

A single incident of harassing conduct is sufficient to create a triable issue of fact as to the existence of a hostile work environment (disagreeing with the Ninth Circuit's decision in Brooks v. City of San Mateo, 229 F.3d 917 (2000)).

"Stray remarks," even when not made in the context of an employment decision or made by a non-decision maker, may be relevant to the existence of a hostile work environment (approving Reid v. Google, Inc. (2010) 50 Cal.4th 512).

The legal standard for harassment should not vary by type of workplace (disapproving of any holding to the contrary in Kelley v. Conco Companies (2011) 196 Cal.App.4th 191).

It is unclear how the courts will view this attempt by the Legislature to dictate the correct legal standards applicable to harassment claims but this is likely to be the subject of litigation.

Limitations on Release and Non-Disparagement Agreements

Settlement agreements in civil or administrative proceedings involving claims of sexual harassment may not prohibit employees from disclosing factual information concerning their claims. This prohibition does not apply to the amount of a settlement or information shielding the identity of the claimant.

Similarly, provisions that prohibit a party from testifying concerning sexual harassment are also unenforceable.

Employers are also now prohibited from conditioning a raise or bonus, or employment or continued employment, on an employee signing a release or waiver of any rights under the Fair Employment and Housing Act. Similarly, an employer may not require an employee to sign a non-disparagement agreement purporting to prohibit the employee from disclosing information on unlawful conduct in the workplace, including sexual harassment.

These last two requirements do not apply to a negotiated settlement agreement to resolve a FEHA claim that has been filed in court, with an administrative agency, alternative dispute forum, or through an employer's internal complaint process. "Negotiated" means the settlement must be voluntary, informed, supported by consideration, and that the employee either is represented by an attorney or given an opportunity to retain an attorney.

The restriction on requiring release agreements would not appear to apply to severance agreements because they do not involve raises, bonuses, or ongoing employment. However the restriction on non-disparagements would appear to apply to severance agreements unless they meet the definition of a "negotiated settlement agreement."

The interaction between SB 820, regarding settlement agreements prohibiting the disclosure of factual information concerning sexual harassment, and SB 1300, permitting non-disparagement provisions in “negotiated settlement agreements’ is unclear.However, presumably this means negotiated agreements can include non-disparagement provisions but they cannot prevent the disclosure of factual information on incidents of sexual harassment.

Employers Virtually Never Entitled to Recover Attorneys' Fees

Amendments to the FEHA confirm that a prevailing employer can only recovery attorneys' fees when the employer establishes that the employee's action was frivolous, unreasonable or groundless. This includes when the employer has filed an offer to compromise pursuant to Code of Civil Procedure section 998 and the employee fails to do better than the offer at trial or arbitration. Note that this is a codification of the holding in Mangano v. Verity, Inc. (2008) 167 Cal.App.4th 944.

September 2018

The Corporate Counsel Symposium is coming up in Philadelphia, from September 16-18. Our section will have a number of presentations, including a presentation on Changes at the Agencies and a Legal Update, along with a panel discussion Harassment and the #MeToo Movement, including insights from a public relations professional. I hope to see many of you there. For those who are unable to make it, our Winter Meeting in Austin is right around the corner in March!

Whether I see you in person or not, please feel free to send news of your wins and successes to me to include in this newsletter. FDCC also has a goal that all of us should be working on: replacing ourselves. If you have candidates for membership of in the Federation, please let me know, or just send the nominations on to Bernie.

And, finally, thank you to those of you who sent newsletter items in for the newsletter and who are doing so much to make our section successful.

Helen

DOL Issues FLSA Opinion Letters

By Helen Holden

On August 28, 2018, the U.S. Department of Labor, Wage and Hour Division issued six new Opinion letters, including four opinion letters under Fair Labor Standards Act (“FLSA”).These Opinion Letters provide employer-friendly guidance on a number of issues, including whether time spent participating in wellness activities or benefit fairs is compensable time, and the application of the retail or service establishment exemption in a business-to-business sales context. Because employers who rely in good faith on an interpretation of the FLSA contained in an official DOL Opinion Letter may have the ability to limit exposure for overtime or minimum wage violations, the recent guidance may be of assistance to clients as they review and analyze compensation practices. Additional details of two issues covered in the Opinion Letters are below.

Compensable Time

Opinion Letter FLSA2018-20 addresses whether the time employees spend in voluntarily participating in wellness activities, health screenings and benefits fairs should be considered compensable time under the FLSA. The activities considered in the Opinion Letter occurred both during and outside regular business hours, were entirely voluntary, and did not relate to the employee job responsibilities. The employer involved in this inquiry also stated that it received no direct financial benefit as a result of employee participation in any events. The specific activities addressed were: a) participation in “biometric screening,” such as testing of cholesterol levels, blood pressure, and nicotine usage; b) participation in “wellness activities,” such as attending health education classes, receiving telephonic health coaching, and attending fitness classes; and c) attendance at a benefits fair to learn about topics such as employer-provided benefits, financial planning, and other benefits available to employees. The Opinion Letter concluded that because the activities in question were primarily for the benefit of the employee, and because the employees were relieved of all job duties during the time they participated in the activities in question, the time spent in these activities is not compensable time.However, the DOL did note, in a footnote, that work breaks up to 20 minutes in length are ordinarily compensable, regardless of how the employee spends the break time.

Retail or Service Establishment Exemption

Opinion Letter FLSA2018-21 discusses the exemption from overtime for commission-based sales employees who work for a “retail or service establishment” under 29 U.S.C. § 207(i) (commonly referred to as the “7(i) Exemption”). This opinion letter was requested by an employer that sells a “technology platform to merchants” which enables both online and brick-and-mortar companies to accept credit card payments from customers. The company sought guidance from DOL about whether its sales representatives could appropriately be classified as exempt from overtime under the 7(i) Exemption. In addressing the requested opinion, the Opinion Letter noted that the employer’s question was primarily whether the company would qualify as a retail or service establishment, as it sells its platform to merchants. Noting that a recent Supreme Court case held that exemptions under the FLSA deserve a “fair” rather than “narrow” interpretation, the Opinion Letter found that the business in question was entitled to claim the exemption. The analysis concluded that the business was a retail business as defined by the applicable regulation because it: a) sells to the “general public” by selling to a variety of purchasers; b) serves the “everyday needs of the community”; c) is at the end of the “stream of distribution” in that its customers do not resell the product; d) sells its product in “small quantities” because it does not sell large quantities of the platform to any single customer. Opinion Letter FLSA2018-21 (citing 29 C.F.R. § 779.318(a)). The Opinion Letter further noted that the fact that the platform is sold to commercial entities “does not change this conclusion” and cited to a number of court decisions in which business-to-business sales have been construed as within the retail or service establishment exemption. The Opinion Letter also addressed whether a physical location is necessary for a business to qualify as a retail or service establishment, and concluded that a business that sells its platform primarily online could still qualify for the exemption.

New York Releases Guidance and Model Policies and Training on Sexual Harassment

By Caroline Berdzik

In late August, New York State released anticipated guidance regarding new sexual harassment legislation that was enacted in May with major provisions effective October 9. The new website provides a model policy, model training, frequently asked questions, and a sample complaint form. All documents have been released as drafts, and the state is seeking public comment on or before September 12, 2018.

The proposed documents answer some questions that were left unclear in the legislation. Highlights include:

Annual sexual harassment training utilizing the state’s model training or an equivalent must be completed by employers for existing employees on or before January 1, 2019

New employees must be provided with training within 30 days of hire

While employers must provide the policy to their employees in writing, it can also be provided electronically, as long as workers are able to access the electronic policy through a computer during work time and are able to print a copy for their records

The training, which must be interactive and require some form of employee participation, can be web-based as long as it accommodates questions asked by employees, includes a live trainer made available during the session to answer questions, and/or requires feedback from employees about the training and materials presented

The annual date for training can be set by the employer after January 1, 2019, and can be based on the calendar year, anniversary of each employee’s start date, or any other date the employer chooses

All employees, including part-time employees, must receive sexual harassment training

The New York state website also provides the following resources:

Model sexual harassment policy

Minimum standards for sexual harassment prevention policies

Guidance on sexual harassment for New York State employers

Model complaint form

Minimum standards for sexual harassment training

Model sexual harassment training

Frequently asked questions

Employers should begin reviewing their policies to determine compliance.

The Ninth Circuit affirmed the Western District of Washington holding that BNSF violated the ADA by revoking a conditional offer of employment after an applicant for a safety sensitive position failed to provide a current MRI and other medical information regarding a potential back condition. Senior Judge Pechman ordered Texas-based BNSF Railway Co. to pay $95,000 to Holt, a qualified applicant who was denied hire because of an old back injury and also awarded permanent injunctive relief. According to EEOC’s lawsuit, Holt, an experienced patrol deputy and criminal investigator, received a conditional job offer for a senior patrol officer position with BNSF Railway in Seattle in 2011. As part of a post-offer medical process, he disclosed a back injury sustained in 2007 and a related MRI test, and at BNSF’s request he had a physical examination, which showed no abnormalities or restrictions. After receiving this information, BNSF’s medical officer in Texas required Holt to provide a current MRI at his expense, an out-of-pocket cost of approximately $2,000, since his doctor would not approve an insurance-reimbursable test because Holt was not experiencing any pain. Holt asked BNSF to waive the MRI requirement. The company refused, and when he failed to provide the MRI, BNSF treated Holt as having declined the job. Noting that “BNSF has failed to demonstrate a likelihood that its discriminatory conduct will not continue in the future,” the court also imposed a permanent nationwide injunction requiring the railway company to bear the cost of any additional medical information it seeks from an applicant and to complete the medical examination process with existing information if no further information is sought.

On appeal, the case turned on whether Holt had a disability and whether BNSF discriminated against Holt because of his disability. The Ninth Circuit concluded that BNSF perceived Holt to have an impairment for the purposes of the ADA. The Court next considered whether it was permissible for BNSF to condition Holt’s job offer on Holt obtaining an MRI at his own expense. The Court noted that an employer would not run afoul of § 12112(a) if it required that everyone to whom it conditionally extended an employment offer obtain an MRI at their own expense. That employer would be imposing a cost on its prospective employees across-the-board, with no regard for their actual or perceived disability or impairment status. Where, however, an employer requests an MRI at the applicant’s cost only from persons with a perceived or actual impairment or disability, the employer is imposing an additional financial burden on a person with a disability because of that person’s disability. BNSF conceded that the medical information it had on Holt at the time it rejected him demonstrated that Holt could perform the Senior Patrol Officer job—yet BNSF still demanded that Holt procure an MRI at his own expense. This is not a case where the medical information previously adduced had been disqualifying and BNSF had provided Holt one last chance to show his ability to perform the job. In such a case, § 12112(a) would not prevent BNSF from choosing not to hire Holt because Holt would be unable to show he was “otherwise qualified for the job.” But BNSF had ample evidence that Holt could do the job. Yet in the face of all that evidence, BNSF nonetheless decided to impose the burden of procuring an expensive medical test on Holt because of its perception that Holt had an underlying back problem.

July 2018

Welcome Helen!

Thank you for allowing me to serve as your Chair over the past few years. I have enjoyed it and appreciated the opportunity. Our new Section Chair will be Helen Holden, whom many of you likely know. Helen has been serving as Vice Chair and is ready to step up and take our Section to the next level. Please join me in congratulating Helen and wishing her the best of luck.

Upcoming Events

Our bags are ready to be packed and we are ready to go! This summer in Hawaii, our topic is “You don’t have to go home, but you can’t stay here,” Dealing with difficult issues in law firms. We are partnering with the Life, Health and Disability Section and the Law Practice Management Section to discuss the difficulties of balancing the realities of legal work and business with insight into employment law topics, including practical issues such as dealing with older, unproductive partners; succession planning; attorneys with health or dependency issues; motivating millennials; and, working with female attorneys who are pregnant. We are pleased to report that Thayla Painter Bohn, VP Corporate and Human Resources, at American Fidelity Assurance Company and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation will be presenting.

On Thursday, June 14, 2018, we had a great time participating in the first-ever Midwest Regional Corporate Counsel CLE Presentation. Our topic was “#NotYouToo,” with Helen Holden, Jean Faure and Caroline Berdzik on the panel with me acting as moderator. If you interested, please let me know so that I can send you the paper.

News and Noteworthy

EEOC REPORTS ON AGING

PAUL M. FINAMORE

NILES, BARTON & WILMER, LLP

On June 26, 2018, the EEOC issued its report on Age Discrimination in the workforce 50 years after the ADEA went into effect. According to the EEOC, “[t]he report finds that age discrimination remains too common and too accepted as outdated assumptions about older workers and ability persist, even though today’s experienced workers are more diverse, better educated and working longer than previous generations.

On May 21, 2018, the United States Supreme Court held that class and collective action waivers in employment arbitration agreements are enforceable. The 5-4 decision is widely viewed as a significant victory for employers. It affirms employers’ ability to require employees to individually arbitrate any employment disputes, and, thus, avoid defending lawsuits in court, including class and collective actions.

In 2012, the National Labor Relations Board (NLRB) took the position that employers violate the National Labor Relations Act (NLRA) if they require employees to waive their rights to participate in class and collective actions in arbitration agreements. Subsequently, the United States Circuit Courts of Appeal split on the issue and the stage was set for the Supreme Court’s review. The Supreme Court granted review of Epic Systems Corp. v. Lewis (Seventh Circuit), NLRB v. Murphy Oil USA Inc. (Fifth Circuit), and Ernst & Young LLP v. Morris (Ninth Circuit) in a consolidated action. In all three cases, the employees signed employment arbitration agreements that included class action waivers, but then filed or participated in class or collective action lawsuits against their employers alleging Fair Labor Standards Act and related state law violations.

The Supreme Court found that pursuant to the Federal Arbitration Act (FAA), courts must enforce employment arbitration agreements that require individual arbitration. The Court also held that the NLRA’s protection of employees’ rights to unionize and bargain collectively does not prohibit class action waivers. Therefore, the Court made clear that the NLRA does not prevent the enforcement of class and collective action waivers in employment arbitration agreements and those agreements must be enforced pursuant to the FAA.

While the law is now clear that class and collective action waivers in employment arbitration agreements are enforceable, that does not mean that all employers should rush to have their employees sign agreements requiring individual arbitration of all employment disputes. Employers should first evaluate the potential advantages and disadvantages of arbitration.

Several advantages of using arbitration agreements include:

Ability to Choose the Arbitrator: The employer and the employee are able to choose the arbitrator (i.e., the decision maker). In litigation, parties to litigation are not able to choose their judge.

Arbitrator Decides in Lieu of a Jury: In federal or state court, a trial before a jury is possible. Jurors who know nothing about your business are asked to resolve disputes of material fact and to apply the law to the facts, which can be a risky proposition.

Private Forum to Resolve Disputes: Arbitrations provide a more private forum than lawsuits in federal or state court. Although it is difficult to ensure strict confidentiality during the arbitration process; unlike lawsuits in federal or state court, the pleadings, testimony, and decisions of the arbitrator are not part of a public record, nor are they easily accessible to the public through a court clerk.

Proceedings Concluded More Quickly: Arbitration proceedings are generally concluded faster than litigating in court. A single-plaintiff discrimination case (not involving complex issues) can be pending for up to three years before the case is concluded in court (whether by motion or a trial). A similar case in arbitration would likely be concluded in half that time.

May Avoid Class Claims: Through the inclusion of class and collective waivers in employment arbitration agreements, employers can potentially limit their exposure to class/collective claims, as discussed in Epic.

In contrast, employers must also consider the potential disadvantages of arbitration agreements and class and collective action waivers. Potential disadvantages include:

Binding Decisions: Arbitrators’ decisions are generally binding on the parties, and appealing is difficult because courts defer to arbitrators – especially when the arbitrator heard the evidence at the hearing firsthand. Therefore, if an employer receives a bad decision from an arbitrator, its ability to appeal the decision will likely be severely limited.

Limited Discovery: Discovery (i.e., exchanging documents, taking depositions, and obtaining subpoenas) in arbitration is sometimes not as extensive as discovery in federal or state court. As a result, employers may not be able to obtain the same amount of information relating to employees’ claims and/or damages prior to arbitration, which could hamper their ability to defend against the employees’ claims.

Arbitrations Can Be Expensive: Arbitration can be more expensive than litigating in a state or federal court. While the costs of arbitration, in some cases, may be less, especially since arbitrations tend to be more streamlined, arbitrations are still very costly. There are a number of costs in arbitrations that are not present in court, including administrative fees charged by the arbitral agency and all work performed by arbitrators is paid by the hour (often at rates higher than the employer’s attorney).

Costs for Court Motions to Enforce and Compel Arbitration: Plaintiff’s attorneys often either file lawsuits in a state or federal court anyway, or seek to invalidate an otherwise enforceable arbitration agreement in a federal or state court. In either case, employers will incur attorneys’ fees to convince a court that the arbitration agreement is enforceable, and to obtain an order requiring the dispute be arbitrated.

Risk of Numerous Single-Plaintiff Claims and Multiplying Costs: As outlined in the two previous points, the costs per individual arbitration can be significant and by prohibiting employees from bringing class or collective actions, employers may subject themselves to multiplying costs. While an employer may avoid a wage and hour class action, it could face numerous individual arbitrations.

Avoiding Arbitration through Summary Judgment is Less Common: In federal or state courts, employers in employment discrimination cases typically file a motion for summary judgment asking the court to dismiss the case because, assuming all the material facts that favor the plaintiff are true, the plaintiff could not prevail based on the applicable law. If appropriate, summary judgment is a very effective tool to avoid a trial, and federal judges in Illinois are more inclined to grant an employer summary judgment than an arbitrator. Arbitrators are sometimes less inclined to grant these motions.

Administrative Agency Charges Still Allowed: Arbitration agreements cannot preclude an employee from filing an administrative charge with an applicable state or federal agency (i.e., the NLRB, U.S. Equal Employment Opportunity Commission, U.S. Department of Labor, etc.), and cannot preclude a government agency, such as the EEOC, from filing a lawsuit against an employer based on an employee’s charge.

In summary, while the Supreme Court has made clear that arbitration agreements with class and collective action waivers are enforceable, the decision of whether employers should enter into arbitration agreements with employees depends on what employers are seeking to achieve with the agreements, and a risk assessment after weighing the advantages and disadvantages of arbitration discussed above. That analysis should be a rigorous one. We encourage you to consult with your employment attorney when navigating through these issues and to ensure your arbitration agreements meet the many federal and states requirements to be enforceable.

SUPREME COURT DEALS BLOW TO PUBLIC SECTOR UNIONS IN 22 STATES IN HISTORIC JANUS RULING JUNE 28, 2018

SEAN P. BEITER

CAROLINE J. BERDZIK

GOLDBERG SEGALLA

In a long-awaited decision, the United States Supreme Court has ruled that "agency fee" laws in 22 states plus Washington, D.C. violate the First Amendment rights of public sector employees. Public sector employees who exercise their right not to join the union representing their bargaining unit can no longer be required to pay "agency fees" to that union to cover the costs of negotiating contracts, processing grievances, and representing unit members in disciplinary proceedings. The ruling in Janus v. AFSCME Council 31 could cripple powerful public sector unions financially and blunt their political influence if a significant number of employees elect to resign their union membership.

The Supreme Court’s 5-4 decision in Janus overrules its 1977 ruling in Abood v. Detroit Board of Education, which held that non-member public sector employees in a bargaining unit could be required to pay the equivalent of union dues to cover the costs of "collective bargaining, contract administration, and grievance adjustment purposes." While Abood required unions to have a procedure for unit employees to object to paying for certain expenses unrelated to representational activity (such as political activity), in practice the agency fees that non-member public sector employees are often required to pay to unions representing their collective bargaining units have been substantially equivalent to paying the full cost of union membership. As the cost differential between full union membership and paying agency fees is usually insignificant, it stands to reason that many employees who would otherwise refrain from joining their respective unions elected to enroll as full union members in order to be able to participate in union votes. Now that employees cannot be required to pay agency fees, there may be a rush of employees to withdraw from union membership in order to avoid paying dues to a union that these employees never wanted to join in the first place.

The Supreme Court considered the substantially same issue in Friedrichs v. California Teachers’ Association in 2016; however, the death of Justice Scalia and the stalled nomination of Merrick Garland to replace him caused the court to deadlock 4-4. The deadlocked Supreme Court resulted in the continuation of the legality of agency fee laws. The confirmation of Neil Gorsuch as the ninth Supreme Court Justice likely changed the outcome in this case.

In New York, the powerful public sector unions have already pushed through amendments to the Public Employees Fair Employment Act (or Taylor Law), which defines the rights and limitations of unions for public employees, in anticipation of an unfavorable decision in Janus. Salient changes include:

Limiting the scope of a union’s duty of fair representation by giving public employee unions the option not to provide representation to non-members in any disciplinary cases. Unions will not be required to offer any legal, economic, or job-related services beyond those provided in the collective bargaining agreement.

Requiring public employers to notify an employee organization of new employees and provide contact information for new employees.

Requiring public employers to allow a duly appointed representative to meet with new employees at the work site during work time for a reasonable amount of time without requiring employees to charge leave time.

Requiring that when union members return to the same employer after voluntary or involuntary leave, these employees will return as union members and the right to deduct dues will be automatically reinstated. The union will not be obligated to obtain new dues authorizations for these employees.

Requires that employers provide contact information for new employees.

Requires that employers allow unions access to the workplace and the employer’s email system to contact new employees for the purpose of recruiting them to join the union.

Prohibits employers from encouraging employees to resign from or relinquish membership in a union or to revoke the deduction of union dues.

Earlier this year Washingtonmodified its law in anticipation of the Janus decision. Specifically, the law:

Removed the requirement that employers receive employee written authorization in order to enforce a union security provision in a collective bargaining agreement and deduct from the payments of bargaining unit members the dues required for union members, or for nonmembers, a fee equivalent to dues.

Removed the requirement that written employee authorizations be filed with the employer.

Proactive Post-Janus Compliance Guidance for Employers

Public sector employers should ensure that they have the appropriate forms and payroll codes to identify non-union members in their system so that they do not collect union dues or agency fees from employees who have elected to refrain from union membership. Employers must also be prepared to process grievances and administer discipline to employees who are not represented by the union.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com, but remember that Helen will be taking this Section over as Chair after Hawaii.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

This summer in Hawaii, our topic is “You don’t have to go home, but you can’t stay here,” Dealing with difficult issues in law firms. We are partnering with the Life, Health and Disability Section and the Law Practice Management Section to discuss the difficulties of balancing the realities of legal work and business with insight into employment law topics, including practical issues such as dealing with older, unproductive partners; succession planning; attorneys with health or dependency issues; motivating millennials; and, working with female attorneys who are pregnant. We are pleased to report that Thayla Painter Bohn, VP Corporate and Human Resources, at American Fidelity Assurance Company and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation will be presenting.

On June 14, 2018, our section will present at the first annual local corporate counsel meeting in Chicago. Our topic will be “#NotYouToo – What Employers Need to Know to Avoid Liability.” I am pleased to moderate a panel with Helen Holden, Jean Faure, and Caroline Berdzik. Please invite your corporate counsel and industry representative friends to attend and consider extending an invitation to a prospective member.

Please remember that Jeff Kelsey has asked for feedback regarding any experience that our members have had with the new Payroll Audit Independent Determination (PAID) program. If you have used the program and/or have insights regarding it, please report back to the section. Jeff believes that this could be of interest to corporate counsel, so please let us know.

News and Noteworthy

NEW JERSEY LAW WILL REQUIRE EMPLOYERS TO PROVIDE PAID SICK LEAVE MAY 4, 2018

On May 2, 2018, New Jersey Governor Phil Murphy signed into law the New Jersey Earned Sick and Safe Days Act, which requires all New Jersey employers to provide earned sick leave to all employees. The law will take effect on October 30, 2018.

Key Elements of the NJ Earned Sick and Safe Days Act

The new law, which preempts local sick leave ordinances that are currently in effect in 13 municipalities within New Jersey, will now require all employers in the state to provide paid sick leave to each employee at the same rate of pay as the employee normally earns. The only exceptions to this coverage are employees in the construction industry performing services pursuant to a collective bargaining agreement, and per diem health care employees.

Under the law, employees will accrue paid sick leave at the rate of one hour for every 30 hours worked, with a maximum cap of 40 accrued hours per year. Employees may begin using accrued sick leave after they have completed 120 days of work for the employer. However, employers are permitted to allow employees to use earned leave at an earlier time if they choose to do so.

Earned sick leave under the law may be used for the following purposes:

For the diagnosis, care, or treatment of, or recovery from, an employee's mental or physical illness, injury, or other adverse health condition, or for preventive medical care for the employee;

To aid or care for an employee's family member during the diagnosis, care, or treatment of, or recovery from, the family member's mental or physical illness, injury, or other adverse health condition, or during preventive medical care for the family member;

Absence due to circumstances resulting from an act of domestic or sexual violence against the employee or the employee's family member, if such leave is to obtain: medical attention; services from a domestic violence agency or victim services organization; counseling; relocation; or legal services;

Absence resulting from the closure of the employee's workplace, or the school or place of care of the employee's child, due to an epidemic or other public health emergency, or due to a determination by a public health agency that the presence in the community by the employee or the employee's family member would jeopardize the health of others; or

To attend school-related conferences, meetings, or events related to the employee's child, or to attend a meeting regarding care provided to the employee's child in connection with the child's health condition or disability.

Employers may require employees to provide reasonable advance notice (up to seven days) for the use of sick leave under the law. However, if the need for leave is unforeseeable, employees may provide notice as soon as practicable.

In addition to the requirement to provide paid sick leave as outlined above, employers are also required to maintain records documenting the hours worked and earned sick leave taken by each employee for a period of five years. The law will be enforced by the New Jersey Department of Labor and Workforce Development, and includes a private right of action to pursue an award for damages.

Advice for New Jersey Employers

Prior to its expected effective date of October 30, 2018, employers in New Jersey should prepare by reviewing their current leave policies to confirm compliance with the requirements of the new law. If their existing policies do not provide the same or greater protections to employees as provided for in the new law, employers are required to institute a paid sick leave policy that fully complies with the law's provisions. Employers should also review their current recordkeeping procedures to ensure compliance with the new law. As with any change or amendment in law, employers should consult with their employment counsel to review the impact of the Earned Sick and Safe Days Act on their current policies and practices.

For information on the New Jersey Earned Sick and Safe Days Act and how it might affect your business, contact:

In FLSA2018-19, one of the return to the past trends of the new DOL, the DOL addressed which rules apply when an employee's rest breaks-short breaks of less than 20 minutes that would otherwise clearly be compensable-are being taken due to the employee's continuing serious health condition, as protected by the FMLA. In the situation presented, the employees' medical certifications required them to have an hourly break of at least 15 minutes. These breaks amounted to a total of 2 hours' lost work over the course of the day, so the employer essentially asked which principle prevails-the FLSA's requirement that short breaks be compensable or the FMLA's provision of leave on an unpaid basis?

In the Opinion Letter, the DOL reminds us that the FLSA does require short rest breaks up to 20 minutes in duration to be compensated, as such breaks are primarily to the benefit of the employer. However, in limited circumstances-if rest breaks, even those of less than 20 minutes, primarily benefit the employee-then they are not compensable. (An example of a rest break that primarily benefits the employee would be an accommodation break needed to assist with an employee's chronic back pain.)

The FMLA-protected breaks considered in this situation were necessary to accommodate the employee's serious health condition-predominately benefitting the employee-thus, the DOL ruled, they are not compensable under the interpretation of the FLSA. Shoring up this analysis, the FMLA itself also expressly provides that FMLA-protected leave may be unpaid. (29 U.S.C. § 2612(c). Further, this unpaid basis has been considered and permitted in conjunction with the requirements of the FLSA.

Remember unpaid leave under the FMLA is afforded special treatment in its interaction with the FLSA's salary basis rule for determining exempt status. An exempt employee will not lose his or her exempt status if his or her weekly salary must be adjusted to account for leave taken on an unpaid basis under the FMLA. In conclusion, the DOL reminds us that employees exercising their right to FMLA are entitled to the same benefits they would receive if they were not taking FMLA leave. So, if employees are regularly entitled to two paid rest breaks during the work day, then the FMLA-protected employees must receive this same compensable time. However, the remaining six break periods may be unpaid and counted toward the worker's annual FMLA entitlement.

The National Labor Relations Board is considering engaging in rulemaking to establish the standard for determining joint-employer status under the National Labor Relations Act. Seethe following link for more information:

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

This summer in Hawaii, our topic is “You don’t have to go home, but you can’t stay here,” Dealing with difficult issues in law firms. We are partnering with the Life, Health and Disability Section and the Law Practice Management Section to discuss the difficulties of balancing the realities of legal work and business with insight into employment law topics, including practical issues such as dealing with older, unproductive partners; succession planning; attorneys with health or dependency issues; motivating millennials; and, working with female attorneys who are pregnant. We are pleased to report that Thayla Painter Bohn, VP Corporate and Human Resources, at American Fidelity Assurance Company and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation will be presenting.

This past weekend, I attended the first-ever Tech U in Philadelphia hosted by Veritext and Tom Oakes. I cannot overstate the excellence of this programming that Bob Christie and his team put together for us. In total, there were about 20 of us, which was the perfect number to allow us to have an intimate learning experience while giving us the opportunity to share our work product with our fellow FDCC members. I learned more than I could have imagined and hope that the FDCC continues with this program for years to come. It truly is an example of how the FDCC is above and beyond.

News and Noteworthy

Recent Events Surrounding Sexual Orientation Discrimination In the Workplace Serve As A Compelling Reminder To Employers to Be Proactive

By: KEVIN FREY, Laner Muchin

The issue of sexual orientation discrimination in the workplace was put in the spotlight recently when it was reported that a National Football League (NFL) football team asked a former college running back about his sexual orientation at the NFL’s Annual Scouting Combine held in Indianapolis, Indiana. A spokesperson for the NFL stated that the question about the player's sexual orientation was contrary to NFL workplace policies.

This comes on the heels of the February 26, 2018, decision of the Second Circuit Court of Appeals in the case of Zarda v. Altitude Express, Inc., wherein the Second Circuit held that sexual orientation discrimination is a form of sex discrimination prohibited under Title VII of the Civil Rights Act of 1964. The Second Circuit found that “sexual orientation discrimination is a subset of sex discrimination because sexual orientation is defined by one's sex in relation to the sex of those to whom one is attracted, making it impossible for an employer to discriminate on the basis of sexual orientation without taking sex into account.”

The decision in Zarda is in line with the position of the Equal Employment Opportunity Commission and the April 2017 decision by the Seventh Circuit Court of Appeals in Hively v. Ivy Tech Community College of Indiana, where the Seventh Circuit also held that discrimination in the workplace based upon sexual orientation violated Title VII. These rulings reflect expanded coverage of federal law to include the protection of sexual orientation.

This recent focus on sexual orientation discrimination in the workplace serves as a good reminder that employers should make sure that their anti-discrimination policies clearly prohibit sexual orientation discrimination, that sufficient reporting procedures are in place, and that employees are regularly trained on these policies and procedures.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

Upcoming EventsAt the Winter meeting in Amelia Island, we had a great session with the ADR Section entitled: “Hold on, Class, it’s not time to waive goodbye just yet!” Daniel C. Gerhan, Director and Senior Litigation Counsel at Boston Scientific Corporation and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation presented, with Wystan Ackerman did a great job of presenting on the issue. If you have not already done so, please check out the paper.

This summer in Hawaii, our topic is “You don’t have to go home, but you can’t stay here,” Dealing with difficult issues in law firms. We are partnering with the Life, Health and Disability Section and the Law Practice Management Section to discuss the difficulties of balancing the realities of legal work and business with insight into employment law topics, including practical issues such as dealing with older, unproductive partners; succession planning; attorneys with health or dependency issues; motivating millennials; and, working with female attorneys who are pregnant. We are pleased to report that Thayla Painter Bohn, VP Corporate and Human Resources, at American Fidelity Assurance Company and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation will be presenting.

News and Noteworthy

PAYROLL AUDIT INDEPENDENT DETERMINATION (PAID) PROGRAM

Jeff Kelsey forwarded the press release from DOL regarding its new Payroll Audit Independent Determination (PAID) program, which is designed to facilitate faster and easier resolution of wage claims. You can see the news release at https://www.dol.gov/whd/paid/. If you use the program and/or have insights regarding it, please report by to the section. Jeff believes that this could be of interest to corporate counsel, so please let us know.

For more information on the program, see Helen Holden’s article below.

SCOTUS REJECTS SEC’S EXPANDED DEFINITION OFWHISTLEBLOWER

MILLER LAW GROUP

California

In Digital Realty Trust Inc. v. Somers, the U.S. Supreme Court has unanimously overruled a Ninth Circuit decision that had relied on the Securities and Exchange Commission’s (SEC) broad interpretation of the definition of a whistleblower under the Dodd-Franks Act.

Dodd-Franks defines whistleblowers as employees who provide “information relating to a violation of the securities laws to the [Securities and Exchange] Commission.” The SEC had passed a regulation expanding the definition to include whistleblowers who report either internally to their employers or to the SEC. Digital Realty Trust involved an employee who reported to management that a vice president had eliminated some internal corporate controls in violation of the Sarbanes-Oxley Act. The employee did not report the violation to the SEC.

In upholding the SEC’s expansive definition of whistleblower to include employees who report internally, the Ninth Circuit relied on the Supreme Court’s decades-old Chevron doctrine, which gives regulatory agencies much leeway for interpreting federal law. But the Supreme Court’s decision to overrule the Ninth Circuit appears to roll back the ability of federal agencies to interpret their own statutes. As Justice Kagan stated during oral argument, “You have this definitional provision, and it says what it says.”

The Supreme Court’s Digital Realty Trust ruling means that federal agencies cannot ignore unambiguous language in statutes in order to make a decision that suits the agency’s purpose. With respect to Dodd-Frank whistleblower protections in particular, while the outcome in Digital Realty Trust is good news for employers because individuals who only report securities violations internally will no longer qualify for Dodd-Frank protection, the decision should not be seen as a green light for employers to ignore internal complaints or become lax with regard to enforcing anti-retaliation policies. More employees may be incentivized now to go directly to the SEC to gain Dodd-Frank protection, and there may be other whistleblower protections that apply to an employee who reports a violation internally.

COURT RULES GRUBHUB DRIVER WAS INDEPENDENTCONTRACTOR;

WHAT’S THE IMPACT FOR THE GIGECONOMY?

MILLER LAW GROUP

California

In a long-awaited decision, a federal district court in California has ruled that a driver for food delivery app Grubhub was an independent contractor and not an employee under California law. While the ruling in Lawson v. Grubhub, Inc. is expected to have an impact on other “gig economy” companies that offer customers an opportunity to connect with goods or services through smartphone apps, the case is not the last word on worker classification.

Plaintiff Raef Lawson was an aspiring actor who worked as a food delivery driver for several months. Lawson filed an individual and PAGA action alleging that Grubhub violated California labor laws, including failing to pay minimum wage and overtime and not reimbursing expenses, by misclassifying drivers as independent contractors.

The court focused primarily on the degree of control that Grubhub exercised over the drivers’ work. It concluded that Grubhub lacked sufficient control to classify Lawson as an employee. Among other factors, Grubhub exercised little control over how drivers performed deliveries and for how long they worked or how often they worked. It also did not require drivers to wear uniforms, to meet any particular appearance standards, or to drive any particular types of vehicles. Nor did the company provide any orientation, training, or performance evaluations.

The judge also noted several “secondary” factors, which could be indicative of an employer-employee relationship, including that drivers were paid by the hour and performed work that did not require special skills, and Lawson was not engaged in a distinct occupation or business. In addition, the drivers’ work – delivering food – is a core service of Grubhub’s business. However, the judge found that on the whole

the evidence weighed in favor of establishing that Lawson was an independent contractor and not an employee.

Impact of Ruling

While this decision is generally regarded as a big win for gig-economy companies that rely on independent contractors, the issue is far from settled. To begin, it is only a federal district court ruling. Thus, while it may have persuasive value, it is not controlling on state or federal courts. In addition, Lawson could appeal the decision to the Ninth Circuit. Even then, the court may not be able to draw clear lines.

What’s more, whether a worker is determined to be an employee or independent contractor depends on the facts of the particular case – and often on the court or agency that is reviewing the matter. For example, on the heels of the Grubhub ruling, the National Labor Relations Board released a 2016 advice memorandum determining that Postmates couriers are employees rather than independent contractors.

Ultimately, as the court acknowledged, the legislature may need to reconcile the existing legal guidelines with our modern economy: “Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition. . . . With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy.”

CALIFORNIA’S “IMMIGRANT WORKER PROTECTIONACT” IN EFFECT;

DLSE ISSUES NOTICE TEMPLATE ANDGUIDANCE

MILLER LAW GROUP

California

California’s A.B. 450, the “Immigrant Worker Protection Act,” took effect on Jan. 1, 2018, imposing strict new obligations on all California employers during immigration enforcement actions and when receiving a Notice of Inspection (NOI) from U.S. Immigration and Customs Enforcement (ICE) regarding I-9 forms and other employment records. Employers should pay close attention to their new obligations under A.B. 450, particularly as ICE has signaled that it will be responding to this new law with increased raids and inspections at California workplaces. Joint guidance on A.B. 450 recently issued by the California Division of Labor Standards Enforcement (DLSE) and the California attorney general, as well as a notice template

from the DLSE, should assist employers with their compliance efforts.

No Voluntary Consent to Worksite Access and Records

A.B. 450 prohibits all employers, and all persons acting on behalf of employers, from voluntarily consenting to allow an immigration enforcement agent to enter nonpublic areas of the workplace without a judicial warrant. Additionally, employers may not voluntarily consent to allow an immigration enforcement agent to access, review, or obtain employee records without a subpoena or judicial warrant.

Importantly, this latter prohibition does not apply where the employer has received an NOI for I-9 Forms and other records.

The new joint guidance on A.B. 450 issued by the DLSE and the California attorney general defines a nonpublic area as one that “the general public is not normally free to enter or access,” such as an office where personnel or payroll records are kept. Furthermore, the guidance states that “for consent to be voluntary, it should not be the result of duress or coercion, either express or implied,” and that the law does not require physically blocking an immigration enforcement agent in order to show that voluntary consent was not provided. The guidance also provides a sample judicial warrant and subpoena, for employers’ reference.

Pre-Inspection Notice; New Template

Under A.B. 450, an employer that receives an NOI has new notice obligations. First, within 72 hours of receiving the NOI (whether it is mailed to the employer or delivered by ICE agents), the employer must provide written notice to each current employee by posting the following information in the language the employer typically uses to communicate employment-related information to its employees:

• The name of the immigration agency that will be conducting the inspection;

• The date the employer received the NOI;

• The “nature of the inspection” to the extent known; and

• A copy of the NOI.

Employers must also provide the written notice within the same timeframe to any collective bargaining representative. Furthermore, the employer must provide an affected employee a copy of the NOI upon the employee’s request.

The DLSE, as directed by the new statute, has published a template that employers may use to satisfy the initial notice requirement. The template is available on the DLSE website. Employers are not required to use the template – and should ensure that it otherwise fits the notice requirements of their particular situation and business before relying on it – but may find it convenient.

Post-Inspection Notice

A.B. 450 also requires employers to provide notice of the results of the inspection to any “affected employees” and their representatives within 72 hours after the employer receives the inspection results. An “affected employee” is an employee who may lack work authorization or an employee whose work authorization documents have been identified as deficient. Any such notice must relate solely to

the affected employee, and must be hand-delivered to the employee at the workplace, if possible. If hand delivery is not possible, the employer should deliver the notice by mail and email (if the email is known). The post-inspection notice must contain:

• A description of all deficiencies or other items identified in the written

immigration inspection results related to the affected employee;

• The time period for correcting identified deficiencies;

• The time and date of any meeting with the employer to correct any identified

deficiencies; and

• Notice that the employee has the right to representation during any such

meeting.

No template exists for this post-inspection notice, and A.B. 450 does not require the DLSE to develop one. Employers should work with experienced Human Resources professionals or legal counsel to develop a compliant notice should the need arise.

I-9 Reverification

In addition to the worksite enforcement and notice provisions of A.B. 450, the law also prohibits an employer from reverifying a current employee’s employment eligibility at a time or in a manner that is not required by the work authorization provisions of the federal Immigration Reform and Control Act (IRCA). Violation of this prohibition alone subjects the employer to a civil penalty up to $10,000.

Takeaways

Civil penalties for violations of the Immigrant Worker Protection Act are steep, ranging from $2,000 to $5,000 for a first violation of the entry and notice requirements and $5,000 to $10,000 for subsequent violations. And with ICE’s recent announcement of plans to increase worksite enforcement operations by

400%, it is critical for businesses to ensure that their HR and management teams understand the new obligations imposed by A.B. 450 so they are legally equipped to handle a visit from ICE or a Notice of Inspection. For more information, employers can refer to the new A.B. 450 joint guidance issued by the DLSE and the California attorney general’s office.

On March 6, 2018, the Wage and Hour Division of the U.S. Department of Labor (DOL) announced that it will soon launch a nationwide pilot program for employers to self-report potential overtime and minimum wage violations. The pilot program is called the Payroll Audit Independent Determination (PAID) program. The primary objective of PAID, according to the agency, is to “improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.” Many details are not yet available, but the DOL has announced the broad outlines of the program, which are available here: https://www.dol.gov/whd/paid/#1

All employers covered by the Fair Labor Standards Act (FLSA) are eligible to participate to resolve potential issues, but the program may not be utilized to resolve issues subject to current investigations by DOL, active litigation, or claims where there is a known threat of litigation. Employers who are interested in participating would begin the process by reviewing DOL’s compliance assistance materials, and then conducting a self-audit of payroll practices. After conducting the self-audit, employers would have the option of submitting the audit results to the agency to request participation in the program, and, if the application to participate is approved, DOL will require the employer to provide additional information and certifications to DOL, including an agreement to correct the pay practices at issue moving forward and pay affected employees back wages. In return, Employers who participate would not be required to pay liquidated damages or civil monetary penalties, and, if payment is accepted by the affected employees, employers will also receive a limited waiver of claims. The waiver of claims appears to be very narrow, and would not result in a waiver of state law claims or a waiver of claims under statutes other than the FLSA. The PAID program is slated to begin in April, 2018, and DOL has stated that it will evaluate the program after six months.

Many details of the program remain unknown, including how far back employers must look to determine whether violations occurred, what criteria DOL will use for approving participation in the program, and the form of the limited waiver of claims. Because program participation requires employers to provide information to the agency, employers should proceed with this program cautiously, and only with the advice of counsel. Even with these questions, PAID appears to be structured in a way that may provide a viable option for employers who are concerned about resolving potential violations of the FLSA.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

At the Winter meeting at Amelia Island, we will be presenting jointly with the ADR Section entitled: “Hold on, Class, it’s not time to waive goodbye just yet!” Daniel C. Gerhan, Director and Senior Litigation Counsel at Boston Scientific Corporation and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation will also be on our panel.

This summer in Hawaii, our topic is “You don’t have to go home, but you can’t stay here,” Dealing with difficult issues in law firms. We are partnering with the Life, Health and Disability Section and the Law Practice Management Section to discuss the difficulties of balancing the realities of legal work and business with insight into employment law topics, including practical issues such as dealing with older, unproductive partners; succession planning; attorneys with health or dependency issues; motivating millennials; and, working with female attorneys who are pregnant. We would like another Corporate Counsel and Industry members to join the panel, so if you have suggestions, please get in contact with me.

News and Noteworthy

MARYLAND HEALTHY WORKING FAMILIES ACT

Best Practices to Avoid Traps for the Unwary

PAUL M. FINAMORE, ESQUIRE

NILES, BARTON & WILMER, LLP

On January 18, 2018, the Maryland General Assembly voted to override Governor Hogan’s veto of the sick and safe leave provisions of the Maryland Healthy Working Families Act. By doing so, Maryland joins the list of many state and local jurisdictions adopting paid leave for employees. At present, the law is slated to go into effect on February 11, 2018, but there are indications that implementation could be delayed. Until further word, employers should be prepared for implementation on February 11, 2018.

The law is complex, with many exceptions to the exceptions, such that careful reading of the entire law is necessary. Considering this, I will attempt to point out certain areas for more focused attention by employers as they implement the provisions of the law. The number of caution signs should be indicative of the many traps for the unwary in the law. Indeed, due to the specific nature in which certain occupations are treated, employers in those industries should carefully review existing policies to ensure compliance.

It is essential to note that the law provides for accrual for existing employees starting on January 1, 2018, such that any delay of the implementation date will not affect accrual unless the law is amended.

Covered Employers

Virtually all Maryland employers are covered, including state and local governments. The question of coverage focuses less upon whether an employer is covered, with certain enumerated exceptions, and more on whether a covered employer must provide unpaid or paid leave.

For employers with 14 or fewer employees, earned sick and safe leave is unpaid.

For employers with 15 or more employees, earned sick and safe leave is paid at the same wage rate that the employee typically earns.

The counting rules provide that the number is determined by the average monthly number of employees during the preceeding year, including not only full-time employees, but also part-time, temporary and seasonal employees without regard to their status and eligibility for safe or sick leave.

Covered Employees

The law is intended to cover all employees except those in certain enumerated categories, including the following:

·Those regularly working less than 12 hours per week

·Under 18 years of age

·Independent contractors

·Real estate agents or brokers

·Those working in the agricultural sector

·Those in certain temporary services agencies

·Those working on an as-needed basis in the health or human services industry

·Those in the construction industry

·Those covered under a collective bargaining agreement, provided that the provisions of the new

law are expressly waived in clear and unambiguous terms

The coverage provisions are complicated and contain exceptions to the exceptions; employers in the industries listed above need to carefully review the exceptions. For example, the exception for the construction industry includes seven separate job titles that are not excluded. Likewise, the exceptions for temporary services agencies are subject to exceptions and qualifications as are those in the as-needed health or human services fields.

The law covers sick and safe leave for employees or for leave due to their family members. The definition of family member is broad, particularly the definition of parents, which includes not only biological, adoptive and step-parents, but also foster parents, those in loco parentis regardless of the child’s age, legal guardians or with whom a minor is in custody, those acting as parents to an employee or the employee’s spouse when a minor; and similarly situated grandparents. Parents include those of the employee and their spouse. Siblings, albeit biological, adopted, foster and step-sibling, of an employee are also included in the definition.

Accrual

Sick and safe leave accrues at a rate of at least 1 hour for every 30 worked. Exempt employees are assumed to work 40 hours per week. For employees who regularly work less than 40 hours per week, the hours are counted based on the hours worked.

Employers may award sick and safe leave in a lump sum at the beginning of the year or provide for accrual during the year.

Employers are not required to allow employees to earn more than 40 hours in a year or to use more than 64 hours in a year. Likewise, total accrual may be capped at 64 hours.

For those employers providing leave in a lump sum at the beginning of the year, carry over of earned leave may be prohibited. For non-profits or governmental employers, carry over may also be prohibited if the employee is employed pursuant to a grant that is limited to one year and not subject to renewal.

Sick and safe leave does not accrue if an employee works less than 24 hours in any two-week pay period or fewer than a combined total of 24 hours in the current and preceding pay period. For employers paid twice monthly, sick and safe leave does not accrue for those who work less than 26 hours in the pay period.

For separated employees who return within 37 weeks after termination, earned leave must be reinstated unless the accrued, but unused sick and safe leave was paid at termination.

Use

Sick and safe leave is for an employee’s and their family member’s medical or preventive care due to illness or injury, maternity or paternity leave, and absence due to domestic violence, sexual assault, and stalking, including time needed to obtain legal advice, victim support, and to relocate.

The leave may be taken in the smallest increment that an employer uses to account for absences. Employers may require an employee to take leave in increments not exceeding 4 hours.

Employers may permit use of sick and safe leave before an employee accrues it.

Employers who choose to permit this must obtain a specific written authorization signed by the employee to allow for deduction of the amount paid from final pay.

For leave that is foreseeable, employers may require notice 7 days before the leave would begin. If the leave is unforeseeable, employees are required to give notice as soon as practicable and must comply with existing leave policies, provided that the policies do not interfere with an employee’s ability to use the leave.

Denial of leave is limited, including in those instances where an employee fails to follow the provisions requiring notice for foreseeable or unforeseeable leave, but the absence under such circumstances must cause a disruption to the employer to be denied. For employers providing services to the developmentally disabled or mentally ill, leave may be denied if the leave was foreseeable, a suitable replacement cannot be located, and service disruption to at least one client would occur due to the absence.

For new employees, sick and safe leave can be denied during the first 106 calendar days worked.

Employers may not require an employee to find a substitute as a condition of granting a request for leave. However, an employer may enter into an agreement with an employee to work additional hours in a pay period or the following pay period, to trade shifts to account for the leave, or to make up hours to cover the hours. In that event, an employer may not deduct accrued sick and safe leave if the hours are covered. Employers are not required to offer schedule changes or to accept requests from employees to alter their hours. In addition, employers are not required to accept schedule changes that would result in an employee’s entitlement to overtime.

There are specific rules regarding use of leave for the restaurant industry, particularly involving tipped employees.

Accrued, but unused sick and safe leave is not payable at termination of employment.

Verification

Employers may request verification for sick and safe leave that exceeds two consecutive scheduled shifts. Verification is also permissible for new employees who use leave between their 107th through 120th calendar days after starting employment. Failure to provide verification may result in denial of the leave request and for leave requested for the same reason.

Employers must add the verification requirement for new employees at onboarding. The law allows for verification only if there is an agreement at the time of hire.

Notice and Recordkeeping

Employers are required to notify employees of the new law and their rights, including the right to be free from retaliation for exercising rights under the law as well as the prohibition against an employee making a complaint, filing or testifying in an action in bad faith. The notice must also notify employees of the right to report alleged violations. The Maryland Department of Labor, Licensing and Regulation has been tasked to prepare the poster and post it on its website. DLLR must also prepare a model policy to assist employers.

In addition to the posting, employers are also required to provide employees with a written statement regarding the amount of leave available for use. This requirement can be satisfied by providing an online system that allows an employee to learn their leave balance.

Records must be kept for 3 years, which are subject to inspection by DLLR. Failure to display the records for inspection gives rise to a presumption of violation of the law.

Violations

It is a violation for an employer to interfere with, restrain or deny an employee’s rights under the law or to take adverse action. Complaints may be filed with DLLR, which has 90 days to investigate and attempt resolution. For violations, DLLR is empowered to order payment for the leave and to award economic damages, including treble damages and civil penalties of $1,000 for each affected employee. If an employer fails to comply, DLLR may seek enforcement in court. Should an employer fail to comply within 3 years after the date of the order, an employee may bring a private right of action under the law. A court may order treble damages, punitive damages, attorney’s fees and injunctive relief as necessary.

Next Steps for Employers

Review existing leave policies

If the current policy is at least as generous as the new law, then the amount of leave does not need to be changed. However, a word of caution: while the law states that it does not require modification of existing policies, it expressly states that existing policies must permit accrual and use of leave under terms and conditions at least equivalent to that in the law. For many employers, policies may need to be amended if they do not cover family members in the same fashion as the law, do not cover the permissible uses enumerated in the law, or do not contain anti-retaliation provisions.

Onboarding

Ensure that new employees agree to verification as part of the onboarding process.

Authorizations

Ensure that every time that leave is advanced that it is accompanied by an authorization that provides for deduction from final pay in the event of termination before the leave has been accrued.

Local laws

Montgomery County employers must continue to comply with the existing county law. The Montgomery County provisions are more generous, such that compliance with the state law will not suffice there. The Maryland law provides that existing laws may remain in effect, but that laws enacted after January 1, 2017 are preempted. An example of a law that is preempted is the Prince George’s County code provision.

Watch DLLR’s Website

Remember that DLLR is responsible for creating a poster and publishing a model policy. The law provides for posting on the DLLR website. Once the poster is online, post it. Review the model policy and compare it with existing policies.

Recordkeeping

Accrual started on January 1, 2018. Review payroll practices and inform vendors of the requirements. Ensure that wage statements or online portals will be available to provide the requisite information at each pay period.

Update recordkeeping policies and practices to ensure that the applicable records are maintained for 3 years.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

At the Winter meeting at Amelia Island, Wystan Ackerman has agreed to co-moderate our joint section meeting with the ADR Section entitled: “Hold on, Class, it’s not time to waive goodbye just yet!” Daniel C. Gerhan, Director and Senior Litigation Counsel at Boston Scientific Corporation and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation will also be on our panel.

I am pleased to report that Thayla Bohn of the Life, Health and Disability Section will be one of the speakers this summer in Hawaii who will discuss challenges facing law firms, from succession planning to dealing with unproductive partners to all issues in between. We would like another Corporate Counsel and Industry members to join the panel, so if you have suggestions, please get in contact with me.

Under the new tax bill, settlement agreements in sexual harassment and sexual abuse claims that include nondisclosure language may result in new tax consequences. Under Section 162(q), which became effective on December 22, 2017, the law provides:

(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE. — No deduction shall be allowed under this chapter for —

(1)any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or

(2) attorney’s fees related to such a settlement or payment.

The language is ambiguous and will need further clarification, including the need to consult with a tax advisor when faced with such a settlement. Prior to the new tax bill, claimants could deduct attorney’s fees paid by or on their behalf as opposed to taxation of the entire settlement. What remains to be seen is whether this new provision will result in increased demands by claimants to account for the potential tax consequences or whether the parties will be forced to negotiate specific language in the release to apportion attorney’s fees by the type of claim to attempt to reduce the impact of this new provision. It could also result in outright refusals to consider nondisclosure agreements. Stay tuned, but note that the provision is already in effect.

In an intriguing twist on associational discrimination, Amber Bridges, a former employee of the Magistrate's Court in the City of Indianapolis, claims she was discharged because of her association with a co-worker who was regarded as having a disability within the meaning of the Americans with Disabilities Act. An "associational discrimination" claim clearly exists under the ADA. But the most common scenarios (as found in guidance issued by the Equal Employment Opportunity Commission) are an employer who terminates an employee whose family member has a disability, out of fear that the family member's condition will cause the employer's insurance premiums to go up; or an employer who terminates an employee because he or she is the partner of someone with AIDS or HIV.

This claim is completely different. Bridges’ "association" consists of being the alleged harasser of the co-worker with the disability. According to the lawsuit, the co-worker had an "obnoxious body odor" that offended Ms. Bridges and caused other employees to complain. Ms. Bridges told her supervisor, and then went out and purchased air fresheners for everybody to use. Other employees later brought in more air fresheners. Ms. Bridges also allegedly instigated and perpetuated gossip about the co-worker. The co-worker complained about the omnipresent air fresheners and said that Ms. Bridges was creating a hostile work environment. The City of Indianapolis terminated Bridges based on these complaints.

Bridges, an employee since 2010, claims that the co-worker's "obnoxious chronic body odor" is a disability protected under the Americans with Disabilities Act. In fact, the Equal Employment Opportunity Commission in some cases considers body odor a protected disability. The issue of course is the nature of Bridges’ “association” with the co-worker. It will be a creative reach if the "associational" provision of the ADA protects individuals who harass or discriminate against persons with or perceived as having disabilities.

On January 5, 2018, the U.S. Department of Labor (“DOL”) clarified its position regarding paid and unpaid internships. They will now use the “primary beneficiary” test for determining “whether interns are employees” under the Fair Labor Standards Act (“FLSA”). The agency has issued a revised Fact Sheet called “Internship Programs under the Fair Labor Standards Act.”

This is a modest change, but should be welcomed by businesses that are debating whether and how to establish internship programs. The debate stems, in part, from conflicting interpretations about how the FLSA’s minimum wage and overtime provisions apply to interns. In 2010, DOL issued a Fact Sheet stating, in effect, that interns were presumed to be employees entitled to minimum wage and overtime, unless six specific factors were present. In the wake of DOL’s 2010 Fact Sheet, a spate of lawsuits proliferated over whether interns in the for-profit sector were owed back wages. In these cases, interns

have sought to be paid past wages, relying, in part, on DOL’s six-factor test to assert that they are entitled to back pay.

Courts, however, have not embraced the DOL’s six-factor test. In 2016, the Second Circuit Court of Appeals found the DOL test to be “too rigid.” Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 536 (2d Cir. 2016). Instead, the Second Circuit utilized a more flexible, balancing approach, focusing upon which party – the intern or the business – is the “primary beneficiary” of the relationship. Id. Other courts have followed suit, including, most recently, the Ninth Circuit Court of Appeals. In December, the Ninth Circuit decided that cosmetology students who performed services in school-owned salons were not employees entitled to be paid wages under the FLSA. See Benjamin v. B & H Education, Inc., No. 15-17147 (9th Cir. December 19, 2017).

The Ninth Circuit applied the Second Circuit’s primary beneficiary analysis, which consists of a set of seven, non-exhaustive factors to weigh and balance in making the determination. Those factors are:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

3. The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.

5. The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

See Glatt, 811 F.3d at 536-37.

The DOL’s action on January 5th made clear that the agency, like the courts, would apply the primary beneficiary analysis. As a result, Employers, can have more confidence that, for FLSA purposes, internship programs will be reviewed under a single standard rather than having to contend with DOL’s prior, somewhat rigid approach.

This change is positive news for employers, to be sure; but employers should proceed with caution in implementing or expanding unpaid internship programs. Specifically, employers must ensure that the programs are truly designed to primarily benefit the interns.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

Reminder, at the Winter meeting at Amelia Island, we will join forces with the ADR Section to discuss the following: “Hold on, Class, it’s not time to waive goodbye just yet!” We are very pleased to have Daniel C. Gerhan, Director and Senior Litigation Counsel at Boston Scientific Corporation and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation on our panel.

This summer in Hawaii, we will be joining forces with the Law Practice Management Section and the Life, Health and Disability Section to discuss challenges facing law firms, from succession planning to dealing with unproductive partners to all issues in between. We are looking for Corporate Counsel and Industry members to join our panel, so if you have suggestions, please get in contact with me.

The Department of Labor issued a Notice of Proposed Rulemaking on December 5, 2017, regarding tip pooling and tip retention. DOL indicates that its revisions to these regulations dating back to 2011 may not have been correctly construing the FLSA and seeks to correct it. Comments are due by January 4, 2018.

In the Notice, DOL indicated that it is proposing to rescind certain portions of the tip credit regulations. The proposal would allow employers to share customer tips with a larger pool, including those traditionally non-tipped workers such as cooks and dishwashers to incentivize them to contribute to good customer service. DOL also believes that the changes could result in a reduction of pay disparity among affected employees. The Notice of Proposed Rulemaking can be found at https://www.federalregister.gov/documents/2017/12/05/2017-25802/tip-regulations-under-the-fair-labor-standards-act-flsa.

On December 1, 2017, NLRB's new General Counsel (GC) Peter Robb delivered an early holiday present in the form of a Memorandum (attached) which indicates he will be scrutinizing all NLRB precedents during President Obama's administration. In Mandatory Submissions to Advice GC Memorandum 18-02 (December 1, 2017) the GC Robb gave clear indication about the direction of the agency going forward.

GC Robb requested that cases involving “significant legal issues” be submitted to the Division of Advice. Those significant legal issues are “cases over the last eight years that overruled precedent and involved one or more dissents, cases involving issues that the Board has not decided, and any other cases that the Region believes will be of importance to the General Counsel.” In the GC’s parlance, these would provide “alternative theories to be advanced.” As Robb notes, “it is Advice’s responsibility to make sure that the Board has [Advice’s] best analysis of the issues.”

In effect, these cases would give the Board an opportunity to reverse case law. The 15 examples include: concerted activity for mutual aid and protection; common employer handbook rules; joint employer; confidentiality of investigations and witness statements; dues check-off; and remedies. So, we may a different analysis and outcome in cases involving Employer Rules such as those (1) prohibiting “disrespectful” conduct or the use of employer trademarks and logos or those (2) requiring employees to maintain the confidentiality of workplace investigations. We also may see a different analysis and outcome in cases involving Purple Communications (361 NLRB No. 126 2014) which found that employees have a presumptive right to use their employer’s email system to engage in Section 7 activities and Piedmont Gardens, (364 NLRB No. 106 (2016)) finding that witness statements must be disclosed to the Union.

GC Robb also rescinded seven agency guidance memos that were issued during the Obama administration, most significantly including the rescission of the NLRB 2015 memo on employee handbook policies and the 2012 Memo on Collyer deferral.

Finally, the memorandum rescinds five initiatives sent by the previous General Counsels. The rescission means that there are certain types of cases will no longer be pursued. They include those:

seeking to extend Purple Communications to other electronic systems (e.g., internet, phones, instant messaging) if employees use those regularly in the course of their work;

arguing that an employer’s misclassification of employees as independent contractors, in and of itself, violates Section 8(a)(1) (but Regions should submit to Advice any case where there is evidence that the employer actively used the misclassification of employees to interfere with Section 7 activity); and

Beginning January 1, 2018, the New Parent Leave Act will permit employees working at sites employing at least 20 employees within 75 miles to take up to 12 weeks of leave to bond with a new child. The new law expands the California Family Rights Act, which currently only applies to employees working at sites with 50 or more employees within 75 miles. This expansion is limited to employees who need leave to bond with a newborn, newly adopted, or newly placed foster child. In order to be eligible for leave for other CFRA-protected reasons, such as an employee's own serious medical condition, an employee must still work at a site with the higher number of employees.

As with other forms of CFRA leave, the new law provides for job protection and continued group health coverage but the leave is unpaid. Employees may be able to use accrued vacation or paid time off, or entitled to partial wage replacement benefits under the state Paid Family Leave program. Employers of San Francisco employees may be required to supplement the state's Paid Family Leave benefits under the City's new Paid Parental Leave Ordinance.

Also effective January 1, 2018, benefits under California's Paid Family Leave program will increase from 55% of an employee's weekly wages to 60% to 70%. In addition, the seven-day waiting period will be eliminated.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

Reminder, at the Winter meeting at Amelia Island, we will join forces with the ADR Section to discuss the following: “Hold on, Class, it’s not time to waive goodbye just yet!” We are very pleased to have Daniel C. Gerhan, Director and Senior Litigation Counsel at Boston Scientific Corporation and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation on our panel.

This summer in Hawaii, we will be joining forces with the Law Practice Management Section to discuss challenges facing law firms, from succession planning to dealing with unproductive partners to all issues in between. We are looking for Corporate Counsel and Industry members to join our panel, so if you have suggestions, please get in contact with me.

In Clemens v. Qwest (9th Cir. November 7, 2017), Clemens sought a "tax consequence adjustment" or "gross up" to compensate for increased income-tax liability resulting from his receipt of his back-pay award in one lump sum. Because a lump-sum award will sometimes push a plaintiff into a higher tax bracket than he would have occupied had he received his pay incrementally over several years, Clemens argues that he is effectively denies him what Title VII promises-full relief that puts Clemens where he would be had the unlawful employment discrimination never occurred. The Ninth Circuit has now joined the Third, Seventh, and Tenth Circuits which all hold that district courts have the discretion to "gross up" an award to account for income-tax consequences. See Eshelman v. Agere Sys., Inc., 554 F.3d 426, 440–43 (3d Cir. 2009) ("[A] district court may, pursuant to its broad equitable powers granted by [42 U.S.C. 2000e-5], award a prevailing employee an additional sum of money to compensate for the increased tax burden a back pay award may create."); EEOC v. N. Star Hosp., Inc., 777 F.3d 898, 903–04 (7th Cir. 2015) (agreeing with Third and Tenth Circuits that "without the tax-component award, [the plaintiff] will not be made whole, a result that offends Title VII's remedial scheme"); Sears v. Atchison, Topeka & Santa Fe Ry., Co., 749 F.2d 1451, 1456–57 (10th Cir. 1984) (upholding a tax gross up because under Title VII, "the trial court has wide discretion in fashioning remedies to make victims of discrimination whole"); see also Thomas R. Ireland, Tax Consequences of Lump Sum Awards in Wrongful Termination Cases, 17 J. Legal Econ. 51, 53–54 (2010) (explaining the circuits' approaches to equitable tax adjustments).

It's that season again, when California employers learn what new tricks (and the rare treat) the state has in store for them. Last week, Governor Brown approved AB 168, adding California to the growing list of jurisdictions prohibiting asking a job applicant for compensation history. AB 168 (Labor Code section 432.3) contains the following points of interest:

1.Employers are prohibited from relying on compensation history in deciding to make a job offer or how much pay to offer.

2.Employers are prohibited from asking an applicant to provide compensation history (applies to pay and benefits).

3.If an applicant makes a reasonable request for the pay scale for the position in question, the employer is required to provide this information.

4.An applicant may voluntarily disclose his or her compensation history, in which case the employer can consider this information in deciding on a salary amount. However, consistent with the California Equal Pay Act, prior compensation by itself is not a justification for any pay disparity between employees of different genders, races or ethnic backgrounds.

Not having compensation history will make it easier for employers to avoid perpetuating unlawful pay disparities. However, some employers want to know if a candidate will consider an offer in their range before investing significant time in the recruiting process. The new law permits employers to disclose their pay range for a position and ask a candidate if he or she would consider it. However, this may impact an employer's ability to negotiate compensation that is less than top of the scale. Alternatively, an employer may ask a candidate what range he or she is looking for.

Point 3 above may be problematic for employers who consider their compensation packages to be proprietary information. The law does not elaborate on what is a "reasonable" request for pay scale information. Hopefully, this includes being far enough into the application process to know if a candidate is a legitimate prospect.

FDCC E-Newsletter

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC E-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it. I would be happy to highlight your blogs or sites, so please send them along to me.

For the Winter meeting at Amelia Island, we are happy report that our Section has joined forces with the ADR Section to discuss the following: “Hold on, Class, it’s not time to waive goodbye just yet!” We are very pleased to have Daniel C. Gerhan, Director and Senior Litigation Counsel at Boston Scientific Corporation and Jeff Kelsey, Managing Director – Employment Law at Federal Express Corporation on our panel.

We will discuss the challenges for employers attempting to use class action waivers in employment agreements and the differing views among the federal circuits. With the importance of controlling litigation costs and predictability, employers are seeking to pursue waivers, but the courts are not always receptive. Our panel will review the status of cases on the topic and some best practices for employers to address these issues.

In August 2017, the Supreme Court of Connecticut unanimously decided that despite the state's "explicit, well-defined and dominant public policy against the possession and recreational use of marijuana in the workplace[,]" discipline less than termination could be appropriate. See State of Connecticut v. Connecticut Employees Union Independent, August 30, 2017.

The case involved Gregory Linhoff, a 15-year employee of the University of Connecticut Health Center. In March 2012, the Health Center's police found Linhoff smoking marijuana in a state van during his night shift. Linhoff also had two bags of marijuana in his his possession. Linhoff was arrested (the criminal charges were dismissed), and UC Health terminated his employment. UC health defended the termination, noting that Linhoff had violated numerous workplace policies, including the health center's drug-free workplace policy, and had shown himself to be untrustworthy to perform his duties, given that he was mostly unsupervised at work and had access to all areas of the Health Center.

Linhoff's union, the Connecticut Employees Union Independent, contested his discharge, and, pursuant to the operative collective bargaining agreement, the parties arbitrated the matter. The arbitrator found that termination was too harsh a punishment under the circumstances and was not mandated by the heath center's drug-free workplace policy. The arbitrator also noted mitigating factors, such as Linhoff's testimony that he had been taking the marijuana as part of his therapy for anxiety and depression. The arbitrator concluded that Linhoff had engaged in substantial misconduct, but found that a more proportional punishment was six months of unpaid suspension and random drug testing upon his return to work.

The state sought to vacate the arbitrator's award and reinstate the termination. The trial court agreed with the state, finding that in light of the "defined public policy" against marijuana in the workplace, termination was the appropriate course of action. In reversing the trial court's decision, the Supreme Court of Connecticut began its analysis by observing the high-level of deference typically afforded to arbitration awards. The court noted, however, that such awards could be overturned where they violated a strong public policy. The court noted Connecticut’s strong public policy against recreational marijuana use in the workplace, but found that the arbitrator's decision did not run afoul of it.

Specifically, the court found that (1) discipline other than termination did not necessarily offend the state's public policy; (2) Linhoff's return to employment would not likely implicate the public's safety; (3) his conduct was completely inappropriate, although not necessarily egregious; and (4) Linhoff was not incorrigible. The court concluded its opinion by again noting that "judicial second-guessing of arbitral awards … is very uncommon and is reserved for extraordinary circumstances, even when drug or alcohol related violations are at issue."

Given that it is a review of an arbitration award, it provides limited guidance on handling employees using marijuana in the workplace. But it does highlight the Court’s perspective on the evolving issue of marijuana use in the workplace.

TOP EMPLOYMENT LAW TRENDS TO WATCH AS 2017 WINDS DOWN

Michele Ballard Miller

MILLER LAW GROUP

This year has brought a variety of new challenges and obligations for employers in California and across the nation. Now, as summer fades and the fourth quarter of the business year begins, employers should take stock of the following employment law trends as they wind down 2017 and prepare for the year ahead.

Deferred Action for Childhood Arrivals (DACA)

On September 5, 2017, the Trump administration announced that it would phase out DACA, which provides deportation protection and work permits to unauthorized immigrants who came to the United States as children. Absent a quick legislative solution by Congress, the phasing out of the program effectively sets work eligibility expiration dates for an estimated 800,000 DACA recipients.

Employers should keep posted on further developments, as recent discussions between President Trump and members of Congress indicate that a deal to protect those affected by the DACA rescission may be reached in the near future. Until then, employers should be certain that they are properly tracking, for Form I-9 purposes, when employee work eligibility expires, and must obey the law when their workers are no longer eligible to work. In doing so, however, employers must take care to not jump the gun and take action against DACA recipients before their work eligibility actually expires. Taking action too early could result in claims of discrimination and wrongful termination based race or national origin, as well as I9 violations.

Equal Pay

The federal Office of Management and Budget recently announced that it was issuing an immediate stay of the revised EEO-1 form, which had been slated to take effect in March 2018 and would have required employers with 100 or more employees to substantially expand the information disclosed to include data on pay and hours worked. The Equal Employment Opportunity Commission (EEOC) and Office of Federal Contract Compliance Programs (OFCCP) had planned to use the new data to step up enforcement of federal wage bias laws.

Although this reporting requirement has been put on hold, employers still need to be vigilant regarding compliance with applicable equal pay laws, including at the state level. California, in particular, has been on the forefront with respect to equal pay, with the recent passage of the Fair Pay Act, which requires equal pay for “substantially similar” work based on gender, race and ethnicity. In addition, Assembly Bill 168, which is currently pending in the California Senate would, if passed, bar employers from inquiring about applicant salary history.

Employers should take proactive steps to evaluate their compensation policies and practices and consider conducting a self-evaluation (possibly under the direction of legal counsel) to identify and fix any pay disparities – before disputes arise.

Paid Family Leave

The United States remains among only a handful of countries without federally mandated paid family leave – and just 14 percent of private workers in this country receive paid leave through their employer. That may be changing. For example, this year San Francisco’s landmark Paid Parental Leave Ordinance took effect, requiring employers to supplement state paid family leave benefits for up to six weeks.

At the same time, companies that provide their own paid family leave benefits may want to take a close look at how such benefits are allocated, in light of a new gender bias suit filed by the EEOC against Estee Lauder Companies, Inc. The EEOC charges that the cosmetics company violated the federal Equal Pay Act and Title VII by maintaining a policy of providing two weeks of paid parental leave for child bonding to fathers, in contrast to six weeks of paid parental leave for child bonding to mothers (separate from paid leave for childbirth recovery). A similar lawsuit recently was filed against J.P. Morgan Chase & Co. Employers should anticipate that more lawsuits like these will follow and evaluate their paid leave policies accordingly.

Marijuana In The Workplace

While marijuana use remains illegal under federal law, the passage in California of Proposition 64, the Adult Use of Marijuana Act, will make recreational cannabis legal effective January 1, 2018. The conflict between federal and state law has led to some confusion about whether employers will be required to accommodate their employees’ use or possession of the drug. On the one hand, Proposition 64 expressly protects an employer’s right to maintain workplace policies relating to marijuana, which would generally include narrowly crafted drug testing policies. On the other, court decisions like the recent Massachusetts Supreme Judicial Court’s ruling in Barbuto v. Advantage Sales and Market, LLC (Mass. 2017) 477 Mass. 456 – where the court ruled that an employee who was fired after testing positive for marijuana during the hire process could proceed with her disability bias claim – highlights that employee rights relating to marijuana are expanding, particularly where marijuana use is connected to treatment for an employee’s disability.

As this area of law continues to develop, employers should regularly assess their written policies, training and education of employees to ensure compliance with California’s drug testing and disability laws.

Ban The Box Laws

“Ban the Box” or “fair chance” laws are increasingly widespread across the United States. These laws generally require employers to remove questions about criminal convictions from job applications and to postpone criminal background inquiries until later in the hiring process, usually after a conditional offer of employment is extended, to give applicants an opportunity to explain their criminal history. Twenty-seven states currently have some form of Ban the Box law applicable to public sector workers and nine states have extended such laws to private employers as

well.

California does not have a statewide Ban the Box law yet, but Assembly Bill 1008, if passed, would amend the Fair Employment and Housing Act (FEHA) to ban criminal history inquiries on job applications and require employers to make individualized assessments before denying employment based on past convictions. San Francisco and Los Angeles already have fair chance ordinances on the books for private employers. Employers operating in those cities should review their hiring processes and train managers to ensure compliance. Employers should also keep an eye on Ban the Box legislation at the state and local level, as there are no signs that this trend is abating.

Class Arbitration Provisions

The validity of class action waivers in employment arbitration agreements is a hot topic that many employers are tracking, now that the U.S. Supreme Court has granted review to three consolidated cases on this issue. Briefing has already been submitted, and oral argument is expected this fall. The Court's decision to take up the issue follows a circuit split last year, where the Fifth and Eighth Circuits upheld such waivers and the Seventh and Ninth Circuits ruled that they violated the National Labor Relations Act (NLRA). Regardless of the outcome, the Court's decision will have a widespread effect on employers’ use of class action waivers. Until then, employers who use – or wish to use – arbitration agreements with class waivers should be certain to consult with counsel to review or draft such agreements to make sure they are in step with current requirements.

Transgender Employees

On the federal level, the Trump administration has rolled back protections for

LGBTQ federal workers this year. On March 27, 2017, for example, the President

signed an Executive Order rescinding the Fair Pay and Safe Workplaces Act, an

Obama-era order that required federal contractors to provide proof of compliance

with federal laws protecting LGBTQ persons in the workplace.

In the meantime, California has been expanding rights for transgender workers. The California FEHA has long prohibited discrimination against an applicant or employee based on gender identity, gender expression or sexual orientation. And on July 1, 2017, new FEHA regulations went into effect regarding transgender identity and expression in the workplace. The new regulations require employers to permit employees to use restroom facilities that correspond with the employee’s gender identity and gender expression and to use gender-neutral signage for single occupancy facilities. Employers also are prohibited, in the absence of business necessity, from imposing dress codes that are inconsistent with an employee’s gender identity or expression, and from requiring documentation on sex, gender, gender identity, or gender expression as a condition of employment. California employers should promptly review their employee handbooks and other policies and practices to ensure they are updated to comply with the new regulations.

FDCC Insights

Every month on the 10th, we are asked to submit articles or items of interest to the Federation for publication in the FDCC Insights e-newsletter. Please send your materials to me so that we can get you published! You can reach me at pmfinamore@nilesbarton.com.

Section Connections

If you are a blogger or have a LinkedIn group that you would like to invite section members to join, please send the information to me so that members know how to access it.

As an example, Robert Lockwood, one of our Section’s Vice Chairs hosts https://employingalabama.com, which provides some great insights not only for Alabama practitioners, but all of us.

I would be happy to highlight your blogs or sites, so please send them along to me.

AUGUST 2017

For those unable to make the meeting in Montreux, the Section had an exciting discussion regarding Guns and Weeds, with plenty of audience participation despite the early hour. Our panelists, Caroline Berdzik, Michelle Stewart, Amy Miletich, and Kay Hodge did a wonderful job leading the discussion regarding the risks that employers face with the new and expanding parking lot laws for gun owners, the legalization of marijuana on the state and local level, and the implications on employers and unions. Please join me in thanking them for a great job. If you are interested in the paper, please let us know.

On September 17-19, 2017, the Corporate Counsel Symposium will be held at the Hotel Sofitel in Philadelphia. There will be a few employment presentations at CCS this year, including discussions regarding workplace violence, an update on the regulatory changes on the federal and agency levels, and areas of concern for corporate law departments. Please sign up and invite your clients. Remember that CCS is offering complimentary registration to all in-house counsel.

JULY 2017

DOL Files Reply Brief: Now What for Employers?

On June 30, 2017, the Department of Labor (DOL) filed its long-awaited reply brief in State ofNevada et al. v. U.S. Department of Labor, No. 16-41606 (5th Cir.), the appeal regarding the overtime regulations that has been pending in the Fifth Circuit since before President Trump’s inauguration. The reply brief provides insight into DOL’s position on the regulations following the inauguration, a position that was in question until the reply brief was filed. As a result, employers now have a clear picture of DOL’s position on its ability to promulgate regulations, but remain unclear as to what the salary level will be in the future.

Background

DOL issued final regulations in May of 2016 that changed the salary level from $455 per week to $913 per week, more than doubling the prior threshold amount to qualify as an exempt executive, administrative and professional employees (EAP). The regulations were scheduled to take effect on December 1, 2016, which provided employers with time to address and implement the regulations. While employers scrambled to determine how to implement them and whether to raise salaries to allow employees to continue to qualify for the EAP exemption, on November 22, 2016, U.S. District Judge Mazzant from the Eastern District of Texas issued a nationwide preliminary injunction that precluded DOL from implementing or enforcing the final regulations in State of Nevada v. U.S. Department of Labor, No. 4:16-CV-00731 (E.D. TX 2016).

In evaluating the extent of DOL’s authority to define or delimit the exemptions, Judge Mazzant noted that the Congressional delegation of authority to DOL was limited by the plain meaning of the statute and by Congressional intent that the EAP exemptions under the Fair Labor Standards Act (“FLSA”) be focused on the bona fide duties that an employee actually performs. Judge Mazzant held DOL exceeded its authority and ignored the Congressional intent by attempting to limit the EAP exemptions, not based on any bona fide duties, but rather by supplanting the duties test and replacing it with a minimum salary requirement that would automatically determine an employee’s eligibility for overtime without regard to the employee’s actual job duties or responsibilities.

DOL filed its appeal on December 1, 2016, initially requesting expedited briefing the following day along with a request for ruling from the Fifth Circuit by December 8, 2016. While the Fifth Circuit did not agree to decide the case by December 8, 2016, it did agree to expedite the appeal, scheduling oral argument on January 31, 2017, only 11 days after the inauguration. However, following the inauguration, the Department of Labor filed three motions requesting extensions to file its reply brief so that incoming leadership would have sufficient time to consider the issues presented in the appeal. As a result of the third motion, the brief was due on June 30, 2017.

The Department of Labor’s Reply Brief

In its brief, DOL argued that the court erred in issuing a nationwide preliminary injunction when it held that DOL exceeded its regulatory authority. DOL noted that it had more than a 75-year history of issuing regulations to define the EAP exemption. Relying on both Fifth Circuit and Supreme Court holdings, DOL argued that its regulatory activity is supported by the text, purpose and history of the EAP exemptions and is consistent with Congress’ delegation of broad authority to “define and delimit” the exemption. It seeks to have the Fifth Circuit confirm its authority.

However, DOL chose not to request review of the actual salary level. Noting that Judge Mazzant’s holding, which addressed the threshold legal issue of DOL’s authority, did not reach whether the salary level of $913 per week was arbitrary or capricious or whether it was supported by the rulemaking record, DOL nonetheless chose to forgo argument on this topic, advising the court that it “has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be.” By doing so, DOL has left the salary level open for further discussion

This position is not altogether surprising in that Labor Secretary Acosta has testified that he questioned the need for the salary level to increase to $913 per week, but did not question the need for an increase from $455 per week. He has suggested that a salary level in the low $30,000 range would be more appropriate. If successful in its appeal regarding its rulemaking authority, it seems clear that DOL will move to increase the salary level without otherwise addressing the duties test in the FLSA. By doing so, it will likely take swift action after the request for information process to promulgate new regulations increasing the salary level, likely at or near the level suggested by Secretary Acosta.

Employer Takeaways

For many employers, employee salaries have already been increased to conform to the salary test in the final rule. It will be difficult under such circumstances to reduce those employee’s salaries, even though DOL chose not to defend its $913 level per week, without alienating employees. For those employers that chose not to implement the new salary level pending appeal, the risk of failing to do so appears to be diminished or eliminated. However, it seems clear that a higher salary level is simply a question of time based on DOL’s reply brief. If successful on appeal, employers should anticipate swift action by DOL to increase the salary level by a few hundred dollars per week. In the meantime, employers that did not implement the $913 per week salary level should review their existing EAP employees to determine how to implement the changes that are certain in the future.

JUNE 2017

DOL Files Reply Brief: Now What for Employers?

On June 30, 2017, the Department of Labor (DOL) filed its long-awaited reply brief in State ofNevada et al. v. U.S. Department of Labor, No. 16-41606 (5th Cir.), the appeal regarding the overtime regulations that has been pending in the Fifth Circuit since before President Trump’s inauguration. The reply brief provides insight into DOL’s position on the regulations following the inauguration, a position that was in question until the reply brief was filed. As a result, employers now have a clear picture of DOL’s position on its ability to promulgate regulations, but remain unclear as to what the salary level will be in the future.

Background

DOL issued final regulations in May of 2016 that changed the salary level from $455 per week to $913 per week, more than doubling the prior threshold amount to qualify as an exempt executive, administrative and professional employees (EAP). The regulations were scheduled to take effect on December 1, 2016, which provided employers with time to address and implement the regulations. While employers scrambled to determine how to implement them and whether to raise salaries to allow employees to continue to qualify for the EAP exemption, on November 22, 2016, U.S. District Judge Mazzant from the Eastern District of Texas issued a nationwide preliminary injunction that precluded DOL from implementing or enforcing the final regulations in State of Nevada v. U.S. Department of Labor, No. 4:16-CV-00731 (E.D. TX 2016).

In evaluating the extent of DOL’s authority to define or delimit the exemptions, Judge Mazzant noted that the Congressional delegation of authority to DOL was limited by the plain meaning of the statute and by Congressional intent that the EAP exemptions under the Fair Labor Standards Act (“FLSA”) be focused on the bona fide duties that an employee actually performs. Judge Mazzant held DOL exceeded its authority and ignored the Congressional intent by attempting to limit the EAP exemptions, not based on any bona fide duties, but rather by supplanting the duties test and replacing it with a minimum salary requirement that would automatically determine an employee’s eligibility for overtime without regard to the employee’s actual job duties or responsibilities.

DOL filed its appeal on December 1, 2016, initially requesting expedited briefing the following day along with a request for ruling from the Fifth Circuit by December 8, 2016. While the Fifth Circuit did not agree to decide the case by December 8, 2016, it did agree to expedite the appeal, scheduling oral argument on January 31, 2017, only 11 days after the inauguration. However, following the inauguration, the Department of Labor filed three motions requesting extensions to file its reply brief so that incoming leadership would have sufficient time to consider the issues presented in the appeal. As a result of the third motion, the brief was due on June 30, 2017.

The Department of Labor’s Reply Brief

In its brief, DOL argued that the court erred in issuing a nationwide preliminary injunction when it held that DOL exceeded its regulatory authority. DOL noted that it had more than a 75-year history of issuing regulations to define the EAP exemption. Relying on both Fifth Circuit and Supreme Court holdings, DOL argued that its regulatory activity is supported by the text, purpose and history of the EAP exemptions and is consistent with Congress’ delegation of broad authority to “define and delimit” the exemption. It seeks to have the Fifth Circuit confirm its authority.

However, DOL chose not to request review of the actual salary level. Noting that Judge Mazzant’s holding, which addressed the threshold legal issue of DOL’s authority, did not reach whether the salary level of $913 per week was arbitrary or capricious or whether it was supported by the rulemaking record, DOL nonetheless chose to forgo argument on this topic, advising the court that it “has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be.” By doing so, DOL has left the salary level open for further discussion.

This position is not altogether surprising in that Labor Secretary Acosta has testified that he questioned the need for the salary level to increase to $913 per week, but did not question the need for an increase from $455 per week. He has suggested that a salary level in the low $30,000 range would be more appropriate. If successful in its appeal regarding its rulemaking authority, it seems clear that DOL will move to increase the salary level without otherwise addressing the duties test in the FLSA. By doing so, it will likely take swift action after the request for information process to promulgate new regulations increasing the salary level, likely at or near the level suggested by Secretary Acosta.

Employer Takeaways

For many employers, employee salaries have already been increased to conform to the salary test in the final rule. It will be difficult under such circumstances to reduce those employee’s salaries, even though DOL chose not to defend its $913 level per week, without alienating employees. For those employers that chose not to implement the new salary level pending appeal, the risk of failing to do so appears to be diminished or eliminated. However, it seems clear that a higher salary level is simply a question of time based on DOL’s reply brief. If successful on appeal, employers should anticipate swift action by DOL to increase the salary level by a few hundred dollars per week. In the meantime, employers that did not implement the $913 per week salary level should review their existing EAP employees to determine how to implement the changes that are certain in the future.

MAY 2017

Ban on Sexual Orientation Discrimination May Affect Arizona Employers

By: Helen Holden, attorney, Sacks Tierney P.A.

A federal court has ruled against sexual orientation discrimination in three Midwestern states, and other jurisdictions may follow that court’s lead.

On April 4, the U.S. Seventh Circuit Court of Appeals became the first federal appellate court to rule that discrimination on the basis of sexual orientation is prohibited by existing federal law. By an 8-3 vote in Hively v. Ivy Tech Community College of Indiana, the Court pronounced that “discrimination on the basis of sexual orientation is a form of sex discrimination.”

The ruling, which is effective immediately for employers in Illinois, Wisconsin and Indiana, came after a number of federal district and appellate courts had hinted that it was time to revisit decades-old precedent finding that sexual orientation was not a protected class.

The Issue

The Hively case involved an openly lesbian woman, Kimberly Hively, who was a part-time teacher at Ivy Tech Community College in South Bend, Indiana. Between 2009 and 2014, she unsuccessfully applied for a number of full-time teaching positions at the school. In 2014, her part-time teaching contract was not renewed.

Believing that the college’s actions were in response to her sexual orientation, Ms. Hively filed a charge of discrimination on that basis with the Equal Employment Opportunity Commission (EEOC) and eventually filed a lawsuit in federal court in Indiana. That court dismissed her case, holding that “sexual orientation” was not among the enumerated protected classifications under Title VII of the Civil Rights Act of 1964.

The Appeal

The Seventh Circuit panel that first heard the case affirmed district court’s dismissal, ruling that a circuit court precedent was binding, even while strongly suggesting that that the precedent should be revisited in light of recent developments, including the Supreme Court’s recognition, in Obergefell v. Hodges (135 S. C. 2584), of the right of same-sex couples to marry.

The panel pointed to, among other issues, “a paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act.” 830 F.3d 698, 714 (7th Cir. 2016). The full Seventh Circuit, including two influential Reagan-appointed circuit court judges, agreed, and ruled in favor of Ms. Hively.

Impact on Employers

For now, the Seventh Circuit’s decision does not affect most employers, as the scope of the ruling is limited to employers in Illinois, Wisconsin and Indiana. Other courts have not yet followed suit, and the Supreme Court has been silent on the issue.

However, there are indications that other circuit courts may follow suit. For example, some courts have recognized that employees who are subjected to sex stereotyping, which can be viewed as a form of sexual orientation discrimination, may have certain protections under existing law. Similarly, recent EEOC pronouncements make clear that the Commission views current law as prohibiting discrimination on the basis of sexual orientation. Also, a number of state and local laws (including city ordinances in Phoenix and Tempe) already prohibit discrimination on the basis of sexual orientation. In short, it seems that it is only a matter of time until other courts and local jurisdictions follow the Seventh Circuit’s lead.

Employers seeking to be proactive and to avoid cutting-edge legal claims may well want to revisit their policies and ensure that they expressly prohibit discrimination on the basis of sexual orientation.

These materials are designed to provide general information prepared by professionals in regard to the subject matter covered. It is provided with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. Although prepared by professionals, these materials should not be utilized as a substitute for professional service in specific situations. If legal advice or other expert assistance is required, the service of a professional should be sought.

BLOGS

AUGUST BLOGS

California Expands Protections For Transgender Employees

By: Carla J. Hartley, Dillingham & Murphy, LLP, San Francisco, CA

The California Fair Employment and Housing Council recently amended its regulations to expand protections for transgender employees. The amendments primarily address access to workplace facilities and when an employer can ask for information about an employee’s sex. The changes were effective July 1, 2017.

The amended regulations require employers to provide equal access to comparable, safe and adequate facilities, without regard to an employee’s sex. “Facilities” include restrooms, locker rooms, dressing rooms, dormitories and the like.

The definition of "sex" under the California Fair Employment and Housing Act, which already included gender identity and gender expression, now includes a third party's perceptions of these terms.

“Gender expression” means a person’s gender-related appearance or behavior and the perception of a person’s appearance or behavior, whether or not stereotypically associated with the person’s sex assigned at birth.

“Gender identity” means a person’s internal understanding of their gender, or the perception of their gender identity, which may include male, female, a combination of male and female, neither male nor female, a gender different from the sex assigned at birth, or transgender.

The amendments require employers to permit employees to use the facilities that correspond to their gender identity or gender expression, regardless of the employees' sex assigned at birth.

Employers with single-occupancy facilities must use gender-neutral signage such as "Restroom," "Unisex," "Gender Neutral, or "All Gender Restroom." This is in addition to a new California law requiring companies that have single-occupancy toilets available for public use to have all-gender signage in place by March 1 of this year.

Note that on July 25, 2017, the Fair Employment and Housing Council gave notice of proposed emergency regulations that would permit employers in certain industries to keep non-flushing single-occupancy toilets marked separately for males and females. This is due to a conflict between the amended FEHC regulations and Cal/OSHA regulations. The industries in question are construction, general industry, agricultural operations, hazardous waste operations and emergency response.

The FEHC amendments generally prohibit an employer from asking about or requiring documentation of an employee's sex, gender, gender identity or gender expression. An employer may ask applicants to voluntarily provide their sex for recordkeeping purposes. An employer can discuss an employee's sex, etc., if the employee initiates the topic in connection with working conditions. An employer may also communicate confidentially with an employee solely for purposes of making sure the employee has access to appropriate multi-user facilities.

An employer is required to identify an employee by the employee's preferred name, gender, and pronoun. However, an employer may use the gender or legal name contained in an employee's government-issued identification if necessary to meet a legal obligation. An example of this would be using the name contained in documentation provided by an employee to complete an I-9 form, even if not the employee's preferred name.

California employers who have not already done so should evaluate their restrooms and other facilities for required changes, modify forms and policies as necessary, and plan for any issues that may arise in implementing the changes in their organizations. The changes should also be covered in employee harassment training.

More Detention For California Employers: New Limits On Rejecting Candidates With Criminal Convictions

By: Carla J. Hartley, Dillingham & Murphy, LLP, San Francisco, CA

A new California Fair Employment and Housing Council regulation on considering criminal history in employment decisions became effective July 1, 2017. The regulation draws heavily from the EEOC Enforcement Guidance on Consideration of Arrest and Conviction Records in Employment Decisions but, in typical California fashion, is also different. The Enforcement Guidance was based on national statistics showing that African-Americans and Hispanics were more likely to have a criminal history. Based on these statistics, the EEOC concluded that an employment policy excluding individuals with a criminal history could cause a disparate impact based on race, in violation of Title VII.

The new regulation requires that, if an employer has a policy of considering criminal history resulting in an adverse impact on a group protected by the Fair Employment and Housing Act, the employer must show that its policy is job-related and meets business necessity, using one of two approaches. Key points of the new regulation are summarized below.

Incorporation of Pre-Existing Limits on Considering Criminal History

The regulation incorporates pre-existing limitations on employers considering the following types of criminal history:

Arrests/detentions not resulting in convictions

Referrals to/participation in diversion programs

Dismissed, sealed, expunged or eradicated convictions

Juvenile offenses

Non-felony marijuana possession convictions older than 2 years

The regulation also incorporates the governmental entity “ban the box” law, local ordinances, and restrictions in the federal Fair Credit Reporting Act and California Investigative Consumer Reporting Agencies Act.

Applicant/Employee Burden of Proof

The applicant or employee must establish that an employer’s policy or practice of considering criminal convictions causes an adverse impact based on a FEHA-protected classification. State or national statistics showing substantial disparities in conviction rates based on, for example, race “presumptively” meet this burden. The employer can rebut this by showing that the outcome would be different based on the specific circumstances, such as specific geographical area in question, types of convictions considered, the job, etc.

If a candidate establishes an adverse impact, the employer must then show its policy is job-related and consistent with business necessity (see below).

However, even if the employer can successfully prove these defenses, the candidate still has an opportunity to, in effect second guess the employer, by showing that there is a less discriminatory policy that would meet the employer's goals as effectively. An example of this would be a narrower list of convictions resulting in disqualification.

Employer Options for Showing Job-Related and Consistent with Business Necessity

The employer must demonstrate that its policy bears a relationship to successful job performance and measures a candidate's fitness for a specific position considering, at a minimum:

The nature and gravity of the criminal offense or conduct

The time that has passed since the conduct or completion of sentence

The nature of the job

An employer can do this by using either a "bright line" conviction disqualification (automatically rejecting all candidates with certain types of convictions) or an individualized assessment. An employer using the bright line approach must show:

Its policy can properly distinguish between individuals that do/do not pose an unacceptable risk, and

The convictions disqualifying a candidate have a direct and specific negative bearing on his/her ability to perform the duties of the position. (Convictions older than seven years generally will not meet this standard unless the employer is legally required to consider older convictions.)

An employer using an individualized assessment must take the following steps with any candidate excluded by the initial screening:

Provide notice

Give the candidate a chance to show that the exclusion should not be applied, and

Consider any additional information provided

Notification if Candidate Not Source of Information

If conviction information is obtained from any source other than the candidate, before taking an adverse action, the employer must notify the candidate and give him or her the opportunity to show the information is inaccurate. Note that this is not intended to give the candidate an opportunity to argue that the information is not relevant.

Comments and Tips

The FEHC has once again created a Hobson's choice for employers: Risk being sued for negligent hiring or risk being sued for employment discrimination.

Review existing policies, procedures and forms to determine if they need to be revised to comply with the new regulation.

Decide if your organization is going to take a “bright line” or “individualized assessment” approach.

A bright line approach is probably more efficient once implemented because it does not require notification and follow up with every candidate excluded by an initial screen. However, this approach will require an analysis to determine which convictions should and should not result in an automatic disqualification. A bright line approach likely cannot be one size fits all for different types of employees. The EEOC Enforcement Guidance makes it clear that excluding convictions for positions that allow access to children or other vulnerable individuals, or involve working with money or private information, may not be defensible for positions such as manual labor.

An individualized assessment approach is likely to be more time-consuming. It may also be difficult to control consistency, potentially resulting in disparate treatment claims. However, with appropriate measures to ensure consistency, it is more likely to defeat a disparate impact claim.

Since most employers learn of criminal convictions through background checks, the new regulation may result in additional notice obligations. Background checks are covered by credit reporting laws which require employers to provide notice of an adverse action (for example a decision not to hire) when it is based on information in an investigative consumer report. Those laws generally require that the notice include the contact information for the agency compiling the report. Now, if an employer learns of a criminal conviction through a background check and decides on that basis not to hire the candidate, the employer will need to ensure the candidate is given the notices required by credit reporting laws and notice of the opportunity to prove to the employer that the information is incorrect.

Surprisingly, the new regulation does not include a "ban the box" provision (prohibiting employers from asking about criminal convictions in an application or otherwise during the initial application process). However, many municipalities have ban the box ordinances (including San Francisco and Los Angeles). These local ordinances usually include other restrictions so employers with employees in different parts of California will need to ensure their policy complies with multiple overlapping laws.

San Francisco’s new “Lactation in the Workplace” Ordinance, which takes effect in 2018, is the latest in a series of parent-friendly legislation rolled out by the City over the past few years -- and highlights the broader trend in California, as well as some other states and cities nationwide, towards increasing parental and family protections.

Here’s an overview of existing lactation accommodation requirements for California employers, and a detailed look at the new San Francisco requirements.

Lactation Accommodation – California and Federal

The California Labor Code already requires employers to provide a reasonable amount of break time to an employee desiring to express milk for the employee’s infant child and to make reasonable efforts to provide the employee with a private room, other than a toilet stall, in close proximity to the employee’s work area. Similarly, the federal Fair Labor Standards Act (50 or more employees) requires employers to provide reasonable break time for an employee to express breast milk for one year following the birth of a child, as well as a private location, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public.

San Francisco Lactation in the Workplace Ordinance

San Francisco’s new Ordinance expands lactation accommodation obligations for San Francisco employers and contains detailed policy and record-keeping requirements.

Lactation Locations

The Ordinance requires employers to provide a lactation location, other than a bathroom, in close proximity to the employee’s work area. The location can even be the employee’s regular work area so long as it meets requirements of the Ordinance. The lactation location must be shielded from view and free from intrusion by others. The area must be safe, clean, and free of toxic and hazardous materials. It must have a place to sit, a surface on which to place a breast pump and other personal items, and access to electricity. Also, the employer must provide, in close proximity to the employee’s work area, access to a refrigerator and sink.

If an area designated as a lactation location is also used for other purposes, employees must be notified that lactation use takes priority over any other uses for the location. Also, in multi-tenant buildings, an employer that does not have a suitable lactation location within its own workspace can satisfy the Ordinance requirements by sharing a location with other employers in that building.

Lactation Accommodation Policy and Process

The Ordinance requires that every employer maintain a written lactation accommodation policy. The policy must be distributed to all new hires and to any employee who asks about or requests pregnancy or parental leave, and it must be included in the employee handbook or written policies.

The policy must include the following:

A statement of the employee’s right to request a lactation accommodation (breaks and lactation location).

A process for requesting an accommodation, including:

1.the means by which employees may submit requests;

2.a statement that the employer will respond to a request within five business days; and

3.a statement that the employer and employee will engage in an interactive process to determine the appropriate accommodations.

A statement that if the employer does not provide the requested breaks or lactation location, the employer will provide the employee with a written response identifying the basis for the denial.

A statement that retaliation in response to a request is prohibited.

Recordkeeping Obligations

Employers must maintain a record of employee requests for lactation accommodations for three years. The record must include the employee’s name, the date of the request, and a description of how the employer addressed the request, including written accommodation denials.

Undue Hardship Exemption

An employer may be exempt from the Ordinance if its requirements would impose an undue hardship, meaning that the accommodation would significantly impact the employer’s business or bottom line, as opposed to mere inconvenience to the employer. By way of example, the Ordinance suggests that it would be an undue hardship for a restaurant employer to grant a lactation accommodation if it would require the restaurant to remove seating or would require construction to comply.

Enforcement

The City’s Office of Labor Standards Enforcement (“OLSE”) will be responsible for enforcing the Ordinance. For the first year the Ordinance is in effect, the OLSE will only issue warnings and Notices to Correct. As of January 1, 2019, however, the OLSE may impose administrative penalties of up to $500 per violation, and employers who fail to promptly comply with a Notice to Correct may be liable for up to $50 per day and $50 per employee affected by such a violation. The Ordinance does not expressly provide employees with a private right to sue for violations (employees may nevertheless file a complaint with the OLSE), and it is unclear whether courts will permit such a private right of action.

Getting Ready

All employers should check to determine whether any states and cities in which they operate have special lactation accommodation requirements. And, employers with San Francisco-based employees should prepare to be in compliance with the new Ordinance as of January 1, 2018. Here are some recommended steps to get ready:

Identify designated lactation areas.

Implement, or update, a written lactation accommodation policy. Include it in employee handbooks and distribute it to new hires and to employees who request or inquire about pregnancy or parental leave. For a sample San Francisco lactation policy, contact Michele Ballard Miller at mbm@millerlawgroup.com.

Train managers and Human Resources staff on the new requirements.

Implement an internal process to maintain records of employee requests for lactation accommodations.

Seek advice from counsel before determining that compliance would be an undue hardship.